According to The Times the Government are looking to mitigate the changes proposed in the Pre Budget Statement three weeks ago. Apparently the plan is to introduce a form of retirement relief of £100,000, aimed to assist small businessmen who are selling up and retiring. As of the time this was posted the HMRC website had no details on this and so we do not know if it is accurate and, if so what is meant by small or retiring or what tests have to be met to qualify.

Any mitigation of the tax is welcome and I will be in touch again when more details are available.

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Below is a brief update on the Arctic Systems case from Lisa Spearman, Mercer & Hole Partner and Tax Plus Blog contributor.

An announcement has been widely expected and commented on in this and other blogs following on from the Revenue’s defeat in the House of Lords. This is a case of the dog that didn’t bark or at least not yet.

The announcement is that there will be an announcement shortly with a view to introducing legislation from 6 April 2008 to stop income shifting.

At the risk of being repetitive - further and better particulars will follow…

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The timing of the Pre Budget Report this year has meant that there wasn’t time for the Government to reach its conclusions on a number of on-going consultations. Notable for their absence are...

 announcements on:-

• Reform of capital allowances and the introduction of a £50,000 Annual Investment Allowance.
• Measures to counter the perceived (from the Revenue’s perspective) avoidance of tax by husband and wife companies.
• Changes in the taxation of foreign income received by UK groups.

We can assume that all of these will be picked up in the Budget 2008.

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From April 2008 the fixed figure on which individuals will be taxed is increased to £16,900 (previously £14,400) – an extra £1,000 a year in tax. You really need to review the cost benefit of having fuel provided by your employer.

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From 6 April 2008 there is to be a dramatic change in the calculation of Capital Gains Tax (CGT). Essentially there will be a flat rate of tax of 18% based on the difference between sale proceeds and cost. This applies irrespective of the type of asset held; the length of time held; removes relief for indexation totally (effectively halving the tax base cost for assets held pre March 1982) and removes a few other mitigation measures. The Chancellor confirmed that the existing rules will apply until 5 April 2008. Depending on whether you have business assets that qualify for full taper relief (an effective rate of tax of 10%) or non-business assets (best possible rate 24%) you have either a five month window to realise a gain or a short period to wait before you sell.

This is complicated and you need to review the CGT position on assets urgently.

The changes outlined do not apply to companies.

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Having listened to the Chancellor speak for just over 30 minutes I was unpleasantly unsurprised to discover the ream of paper supporting his speech. The devil is certainly in the detail and it is becoming increasingly apparent why – to use an analogy – in Peter Pan the same person who plays Mr Darling also plays Captain Hook.

The tax implications and complications are potentially horrendous. Watch this space for further details...

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