HMRC may be prepared to help. It has recently issued guidance on the implementation of managed payment plans (plans). These plans allow tax liabilities to be paid by equal monthly instalments over a period of up to 12 months spaced equally, either side of the normal due date(s).

The plans will provide protection from interest and penalties. They are available for income tax, capital gains tax payable and corporation tax. However, large companies are not eligible.

Plans are voluntary. You have to send a proposal to pay to HMRC who will accept it provided certain conditions are met. These currently include:

• you must have filed your return for the year
• you must have paid all previous tax due or have set up a separate arrangement to pay
• payments must be made, by Direct Debit or Standing Order, by equal monthly instalments on the fifteenth day of each month, spread equally either side of the due date.

This may not be a perfect system and it certainly needs planning in advance which makes it of little use for this July. But if cash is tight this may help come next January, provided you take action now.

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Cathy Corns is a Tax partner at Mercer & Hole.  

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HMRC have provided further information regarding this year's 'New Disclosure Opportunity (NDO).’

Whilst most people using the NDO to disclose details of income and profits derived from foreign assets are likely to face a penalty of 10%, customers of the high street banks who received letters under the 2007 Offshore Disclosure Facility, but chose not to contact HMRC, will face a 20% penalty if they now use the NDO to make a disclosure.

The advice in our previous blog holds good; if you think this may affect you, take professional advice as soon as possible. 

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David Mansell is a Tax partner at Mercer & Hole.

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The news on pension contributions just seems to get worse. We already have a 20% tax charge on ‘irregular’ contributions above a £20,000 annual allowance for individuals earning over £150,000 (to prevent them topping up their pensions before the new rules come totally into force in 2011).

However, it now transpires that individuals who change pension providers (almost certainly those who change employers) will have their contribution history wiped out. As a result they will face the full 20% tax on all their contributions over £20,000, even if they have a history of paying regular contributions of well above that amount.

I know it is legal – but is it fair? 

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Cathy Corns is a Tax partner at Mercer & Hole.  
 

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The moral is – to use a cliché – the devil is in the details. Make sure yours are right.
It seems odd that for couples who borrow funds in joint names tax relief is usually available for the interest paid by the spouse using the loan for a qualifying purpose HMRC normally accept an entitlement to full relief for the interest paid, even if the interest is paid out of a joint account (see HMRC’s Savings & Investment Manual 10040).

However, where one spouse takes out the loan, which is then used in a joint qualifying investment, HMRC’s view is that income tax relief would only be available to the spouse who took out the loan, and only then in proportion to the amount of qualifying investment by that spouse.

The moral is – to use a cliché – the devil is in the details. Make sure yours are right.

Comment on this blog in the space provided below, or visit my profile for details of how to contact me. 

Cathy Corns is a Tax partner at Mercer & Hole. 

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HMRC has now issued some guidance notes on the taxation on company cars and vans, including calculators to provide an indication of benefits.

Company cars - the link to HMRC’s website is http://www.hmrc.gov.uk/cars/company-cars-factsheet.pdf. 

Company vans - the link on HMRC’s website is http://www.hmrc.gov.uk/vans/vans-info.pdf.

Comment on this blog in the space provided below, or visit my profile for details of how to contact me. 

Cathy Corns is a Tax partner at Mercer & Hole. 

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National minimum wage is set to increase to £5.80 per hour with effect from October 2009. The rate for 18 to 21 year olds will rise to £4.83, and for 16 and 17 year olds to £3.53.

Comment on this blog in the space provided below, or visit my profile for details of how to contact me. 

Cathy Corns is a Tax partner at Mercer & Hole. 

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...but says it will now appeal to the House of Lords.

Essentially Vodafone is arguing that UK rules on the taxation of profits of foreign subsidiaries (Controlled Foreign Company rules) are incompatible with European Union law. However, the Court of Appeal ruled that CFC rules apply to companies operating outside the European Economic Area and also to EEA companies without genuine economic activities.

The UK tax legislation is designed to stop UK companies avoiding tax by diverting income to subsidiaries in low-tax countries.

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Cathy Corns is a Tax partner at Mercer & Hole.  
 
 

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If you were concerned about the recent article in the press that effectively said manufacturing companies no longer qualify for Research & Development (R&D) this is a note to reassure you.

We have confirmed with HMRC that for the majority of owner-managed business there is not an issue. For those exceptional cases that may be affected, in any case, earlier years will remain untouched.

Going forward, it appears that the only area for debate will be on consumables ie the cost of the parts used in the manufacture of test products. The costs for salaries, light, heat etc should still qualify for R&D relief as before.

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Cathy Corns is a Tax partner at Mercer & Hole.

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The Chancellor announced a further deferral of the proposed ‘income shifting’ legislation in the Budget. However, the ‘settlements’ anti-avoidance provisions are still very much in force and the Revenue is applying them.

In a recent case (Buck v Revenue and Customs Commissioners [2008] SpC 716) Mr Buck owned 9,999 shares and Mrs Buck 1 share in a company. Mr Buck waived the dividends on his shares, which enabled enhanced dividends to be paid on his wife’s share. HMRC argued and won that the dividend waivers constituted a ‘settlement’, and assessed Mr Buck on the enhanced dividends.
The main problem was that there were insufficient reserves to cover the dividend if the waiver had not been made.

In another case (Mr and Mrs Bird v Revenue and Customs Commissioners [2008]), Mr and Mrs Bird were the initial shareholders of a company, owning one share each. The company issued a further 98 shares at par, 19 shares each to Mr and Mrs Bird, and 20 shares to each of their three daughters. Dividends were paid to all shareholders. HMRC argued, and again won, that the dividends paid to the daughters (until they reached age 18) constituted income arising under a ‘settlement’, which should be treated as Mr and Mrs Bird’s income.

Any tax planning of this nature will need to be considered carefully if it is to be effective.

Comment on this blog in the space provided below, or visit my profile for details of how to contact me. 

Cathy Corns is a Tax partner at Mercer & Hole.  
 

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