Mercer & Hole’s Business blog - Tax

The Treasury recently announced that the Government intends to create a new tax-free children’s savings account by the end of next year, following the end of Child Trust Funds next January. This new account, a ‘Junior ISA’, is designed to offer parents a simple, tax-free way to save for their children. The new account should have the following key features: All income and gains will be tax free Funds placed in the account will belong to the child and cannot be accessed until the child reaches age 18 Investments will be available in cash or stocks and...

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The honest answer is still in limbo. I had hoped that the last Finance Bill would give some details on how exactly the new scheme would work from April 2011 but the Bill does not cover this area, and we will just have to wait until, probably, the end of this year or later for draft legislation and possibly until after the changes are introduced for the law itself. This does mean a lot of uncertainty for taxpayers, which is not ideal. It is hard to plan when you do not know what the rules will be. Cathy Corns is a...

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The proposal to remove child benefit from higher rate taxpayers shows the links between the tax and benefits system. With inflationary rises more people will move into higher rate tax bands and the raising of the personal tax allowance to £7,475 next April will not help because it is accompanied by a lowering of the 40% higher rate threshold to £42,375 from £43,875, so that only the lower paid benefit from the change. Press reports indicate that this will push many workers with families into the higher tax band and see them lose their child benefit. This does emphasise the need...

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You should be aware that HMRC is currently reviewing the IHT business property relief (BPR) clearance service. HMRC has confirmed it will continue to accept BPR clearance applications, while this review is in progress. It will make a formal announcement on the clearance service and update its guidance once the review has been completed. In reality this probably means that if you want certainty on BPR you may need to act quickly.  Cathy Corns is a tax adviser and a partner at Mercer & Hole. The views given in this blog are personal to the author, if you would...

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The recent publicity on tax demands made me look at how long you should have to wait to know HMRC cannot go back to any given year and ask for more tax. Following a court decision, HMRC issued some guidance saying that a taxpayer can restrict the opportunity for discovery:              ‘by providing enough information for an HMRC officer to realise within the enquiry period that the self assessment is insufficient'. The problem is how do you know what information an officer needs to realise that it is...

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New legislation was proposed last week for the Scottish Parliament to be given powers to set its own tax rates. The proposal is that Scottish income tax would be set at 10p per pound lower than the rest of the UK, with a corresponding cut in the Treasury grant. The Scottish Parliament could then set the Scottish rate. If accepted, the new law would be implemented in full by 2015. This could be symbolically important but the details will be complicated. I cannot see the benefits, but am open to opinions. Cathy Corns is a tax adviser and a partner at...

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We seem to have had an awful lot of changes to the law already this year with two Finance Acts already and a further one promised for the Autumn. There has been a lot of draft legislation and various consultation documents have been published.  But that is not all. HMRC has recently published an update on consultations and some of the key ones still outstanding are: A review of, and proposed reforms to, the Controlled Foreign Company regime – the law which seeks to charge UK tax on the foreign profits of subsidiaries in lower tax regimes. ...

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HMRC has already launched a number of toolkits covering capital gains, small companies’ relief, capital allowance and private versus business expenditure and is apparently planning to launch a further six covering: Capital versus revenue; Losses; VAT input tax; Directors’ loan accounts; Inheritance tax; and Benefits from employment. The question really is what to do with them. Working through them in the laid down detail takes a long time . Making a mistake and not having used them could lead to an increased penalty. No easy answer on this one. Cathy Corns is a tax adviser and a partner at...

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From 22 June 2010 there is a significant differential in capital gains tax rates between general assets and the business assets that meet the (tight) criteria for entrepreneurs’ relief. Gains up to £5 million on such assets are taxed at a 10% tax rate. Gains on other assets are taxed at 18% for (broadly) basic rate taxpayers and 28% otherwise. So if you do not qualify for entrepreneurs’ relief what can you do? Some ideas are: Fragment gains to maximise the benefit of the annual exemption and 18% tax rate between spouses and across years and taxpayers. Try and time gains to years of...

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I recently came across a somewhat concerning anomaly in the tax position on entrepreneurs’ relief. There is a distinct difference in tax treatment between self-employed and employed individuals where their involvement with a business ceases. A self-employed individual who has been in business for at least a year is entitled to entrepreneurs’ relief where he ceases to trade and subsequently disposes of his business assets within three years of the cessation date. However, where an individual is employed by, or a director of, a company and resigns as a director and then subsequently sell his shares, he has...

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