Mercer & Hole’s Business blog -

The Government has recently announced the annual increase to the National Minimum Wage to apply from 1 October 2008: The proposed increases to the current rates are as follows:       CURRENT     PROPOSED ADULT       £5.52         £5.73 18-21 year olds       £4.60         £4.77 16-17 year olds       £3.40         £3.53 ...

Click here to continue reading.

An employer is obliged to deduct tax and insurance from any payments made to their employees. But what happens if they get this wrong – perhaps because they mistakenly thought the “employee” was self-employed? This was the point decided in a 2005 tax case, Demibourne Limited v Revenue & Customs Commissioners. The individual (an odd-job man called Mr Bone) had paid tax on the basis that he was self-employed. However, having concluded that Mr Bone was in fact an employee of the company, the Special Commissioner required the company to “gross up” all the payments they had...

Click here to continue reading.

In order for an employee or director of a company to benefit from the new Entrepreneurs’ Relief after 5 April 2008, he or she must have held more than 5% of the company’s ordinary shares for at least twelve months. But it will not be necessary to have held all of the shares being sold throughout the period, as one of the Revenue’s FAQs makes clear: Q - I already hold over 10% of the shares in the company. If I acquire another 4% of the shares and sell the whole 14% 6 months later, can I get entrepreneur’s relief...

Click here to continue reading.

Over the last 24 hours there have been a number of blogs posted in relation to the 2008 Budget announcement – on both SME Plus blog and our sister blog Tax Plus blog. For your reference and convenience please find below a list of the respective blogs posted: SME Plus Budget 2008 - Pension Tax Relief Budget 2008 - Capital Allowances Budget 2008 - Enterprise management incentives ("EMI") share options Budget 2008 - VAT Budget 2008 - Trade losses for individuals... Budget 2008 - Pensions Budget 2008 - Associated companies Budget 2008 - ISAs Budget 2008 - Income shifting Budget 2008 - Corporation tax simplification... Budget 2008 - Enterprise Investment Scheme Budget 2008 -...

Click here to continue reading.

The previously announced reduction in basic rate income tax from 22% to 20% from 6th April created concerns for 2 sectors. Firstly, charities were concerned that they would lose out because Gift Aid donations would only benefit from 20% income tax relief with a resulting reduction in the gross donation. Secondly individuals making personal pension contributions would only benefit from 20% tax relief at source instead of 22%. For instance a personal pension contribution of £78 would be worth £100 after basic rate tax relief in 2007/08. After 6th April the same £78 contribution becomes £97.50 after basic rate tax relief. This represents a small but significant...

Click here to continue reading.

Although most of the changes on capital allowances have been known about for several months, there are a couple of minor tweaks announced today. The 100% first year allowance on cars with very low CO2 emissions will continue for an additional five years, until 31 March 2013, but the qualifying emissions threshold will be reduced from 120g/km to 110g/km driven   Small balances left on capital allowances pools will be able to be written off where the balance has been reduced to £1,000 In addition, there is confirmation of new rules to allow companies (not unincorporated businesses) to surrender losses...

Click here to continue reading.

Companies thinking of offering EMI share options to employees will have three new factors to consider:   the market value (at the date of grant) of the shares covered by the option is to increase to £120,000;  the company offering the option must have fewer than 250 employees; and new restrictions are being placed on the company’s activities. The last of these is unlikely to affect most companies (as shipbuilding, coal and steel production tend not to be that prevalent in the SME market) but the first two are potentially of greater relevance. ...

Click here to continue reading.

... are being restricted for tax purposes. At present an individual who carries on a trade, on however part-time a basis, can, subject to certain detailed restrictions, set this loss off against other income and gains. Anti-avoidance legislation introduced in the 2007 Finance Act restricted the offset of tax losses for non-active or limited partners. In the Revenue’s view this merely resulted in individuals entering into loss-making trades on a sole trader basis purely for the tax relief on the losses. As a result this legislation is being introduced with effect from 12 March 2008 for individuals who spend less than ten...

Click here to continue reading.

There appear to be no dramatic new announcements relating to pension planning in this budget. As previously announced the annual allowance increases to £235,000 for 2008/09. The lifetime allowance becomes £1,650,000. Individuals who have not reviewed their pension arrangements since the 2006 'Pension Simplification' should do so now. In particular transitional protection against the effects of the lifetime allowance can be applied for. The deadline for applying for this protection is 5th April 2009....

Click here to continue reading.

When looking at whether companies are “associated”, the Revenue has historically been able to include the rights of people in partnership. This has meant that two companies, controlled by people in partnership – but with no other link to one another – could be treated as associated and find that their tax bills rose as a result. With effect from 1 April 2008, the definition of common control will be revised, so that business partners will only be taken into account where “relevant tax planning arrangements” (put in place to reduce tax liabilities) are in place. Further detail...

Click here to continue reading.