Husband & Wife Companies - The Arctic Systems Case Update
The HM Revenue & Customs are challenging the tax planning of setting up companies in which both husband and wife are shareholders. This is applicable where income has been split between the partners to ensure that both have sufficient income to use their basic rate band. The HMRC have been successful in the courts in challenging one arrangement in the case of Jones v Garnett.
On 15th December 2005, the Court of Appeal held that “the settlements legislation” did not apply to Mr & Mrs Jones, shareholders of Arctic Systems Ltd. This meant that the dividends Mrs Jones received from Arctic Systems Ltd, the couple's jointly-owned company, were taxed on Mrs Jones and not reallocated to her higher taxpaying husband.
On 13th January 2006, HMRC issued a statement confirming that they have decided to petition the House of Lords for leave to appeal against the Court of Appeal decision, having been refused leave to appeal by the Court of Appeal itself.
On 24th March 2006, HMRC were granted leave to appeal to the House of Lords against this decision. Opinion amongst the professional bodies is that it will be several months before this appeal is heard and that the judgement will be handed down towards the end of the year.
Budget 2006 Gordon Brown delivered his tenth budget as Chancellor on Wednesday the 22nd of March 2006. This was very much an electioneering budget for Gordon Brown with little substance. There were, however, a few hidden surprises.
There was more funding for schools, special initiatives related to the Olympic Games and funds to support victims of terror attacks. There were the usual increases in duty rates and tweaks to the tax rates but nothing to really address any of the big concerns, the Child Tax Credit scheme will remain and the increase in the Inheritance Tax nil rate band does not really tackle concerns over the effect of rising house prices.
The Budget coincided with the release of Lord Carter's review of HM Revenue and Custom's online filing services, as a result of which the big news is that the self-assessment return filing deadline is likely to be moved to 30th September for paper returns and 30th November for returns filed online from 2008 – leaving a much shorter window between the end of the tax year and the filing deadline.
We already knew that the “Pensions Simplification” rules would be effective from 6 April 2006 and the 0% Corporation Tax band and Non-Corporate Distribution Rate rules would disappear from 1 April 2006.
Further information on the Budget will be available online and in our April 2006 Newsletter.
Recovery of VAT on Road Fuel Purchased by Employees HMRC have announced some changes in the way in which VAT on road fuel purchased by employees can be recovered by their employers - effective from 1 January 2006.
These changes come as a result of the conclusion of a recent European Court of Justice (ECJ) case, which found that the current UK VAT recovery system infringed EU law. Click here to find out more.
Top Ten tips to completing your Tax Return
HM Revenue & Customs has published 'Ten Top Tips' to help taxpayers file their self assessment returns correctly before the 31 January deadline, to avoid the £100 penalty.
The 'tips' provided by HMRC refer to the 10 most common mistakes people make when filing their tax returns.
Please avoid the following mistakes while flling out your tax returns this year.
The top ten mistakes are:
A 'yes' tick has been entered in one of the questions 1 to 9 on page 2 of the tax return but the supplementary page which needs to be provided has not been sent with the return.
The self-employed pages have not been completed, particularly on page SE3 from box 3.74 onwards.
Information has been detailed on separate schedules instead of being included in the return.
Manuscript notes have been entered on the return i.e. "per accounts" and/or "information to follow" instead of the actual figures.
A separate supplementary page for each individual employment has not been completed. This is required.
The net figure of employee personal pension premiums has been entered, instead of the gross figure, in box 14.11 of the core return
The capital expenditure figure has been entered in Box 3.14 of the Self Employment pages, instead of the capital allowances figure (i.e. claiming excessive relief).
Question 19 of the core return has not been completed, where a repayment is due.
Pay has been entered in box 1.8 on the Employment pages, but any tax deducted has not been entered
The return has not been signed, which means it will be rejected immediately.
Pension Changes to cost Taxpayers millions
Recent changes to the Pensions Scheme announced by the Chancellor in the Pre Budget Speech are set to cost Taxpayers in the Cambridgeshire area in excess of £120 million in potential tax savings.
In his pre-budget speech, the Chancellor announced that Self directed pension schemes such as the small self administered schemes (SAS) and self invested personal pensions (SIPP) will be prevented from holding directly owned residential property.
This has caused disappointment amongst a number of Cambridgeshire residents. With a population in excess of a 100,000 and a significant number of this population in the higher tax bracket with buy-to-let mortgage properties; these changes in the legislation will cost Taxpayers in excess of £120 million in potential tax savings.
Andrew Webster, Managing Director & specialist Tax Consultant, at Andrew Webster Limited said "by not allowing taxpayers the opportunity of putting their residential properties into SIPP's and/or SAS's, the HMRC has upset tax planning across the country and cost our clients millions in tax savings."
Not only do taxpayers across the country lose out on these potential savings but they have also paid significant sums of money seeking tax planning advice from their accountants and Independent financial advisors and the HMRC's turnabout has meant that this tax planning has been thwarted.
Andrew Webster Limited maintains that "the Cambridgeshire taxpayer need not despair. There are still various opportunities which exist before the new pensions regime comes into effect on the 6 th of April 2006 and we have been able to guide a number of our clients to benefit from these opportunities. We urge taxpayers across the region to seek advice from their Accountants and IFA's."
WebsterAccounts Links with CIDA to provide free education
We Andrew Webster Limited has recently signed an agreement to provide free user licenses for WebsterAccounts– Our Online Accounting service to all students on the Accounting and Finance modules at Community and Individual Development Association (CIDA) in Johannesburg, South Africa.
CIDA City Campus has reinvented traditional models of higher education. Every student at this tertiary institution is on a scholarship and comes from a disadvantaged background. The passion behind CIDA is to provide mass-scale, quality higher education and to provide an effective human development strategy for the nation. Its vision is to contribute to the economic and social transformation of the sub-continent.
CIDA offers the best of contact education, combined with the ability to import the best content in the world in any format, whether via video conferencing, video, streaming video, internet, PowerPoint, audio, satellite, or any other format.
States Andrew, “CIDA’s aim is to be provide access to high quality education to those from a disadvantaged background. We share this vision and found it hard not to be involved in some way.
Andrew Webster Limited Invited to Exhibit at Homecoming Revolution Seminar
at South Africa House in London
Andrew
Webster Limited were recently invited to exhibit at the “Create
your Own Business In South Africa” Seminar being organised by the Homecoming Revolution and being held at
the South African High Commission in London on the 14th and 15th of May
2005.
This follows and builds on the recent successful launch in Johannesburg
of the South African edition of WebsterAccounts, a professional
Online Accounting Service, developed by Andrew Webster Limited and represents
the firms increased commitment to strengthening its presence and links
with the region.
Andrew Webster, Managing Director at the firm, states, “We are delighted
to have been invited to exhibit at the seminar as it provides an ideal
window for us to detail, to a very focussed audience, the services we
could provide to make the decision of returning home to South Africa a
lot easier. This also allows us to build on our considerable success in
launching the South African edition of WebsterAccounts, our Professional
Online Accounting service, in Johannesburg earlier in the year. “
WebsterAccounts
launched in South Africa The
Country Club in multicultural Johannesburg witnessed the Launch
of the South African edition of WebsterAccounts - Andrew Webster
Limited's Online Accountancy Software. The launch took place on the 17th
of March 2005 at 5:00pm in the evening.
Andrew Webster, Managing Director at Andrew Webster Limited states 'we
were delighted to have the opportunity to work with a South African firm
of accountants and to deliver them a version of the software for South
African businesses. A key benefit for the UK firm is that we will now
be able to build a network of accountants in South Africa who can do work
for UK clients. We hope that this will allow us to offer a more cost effective
accountancy service to our clients to complement the high quality advice
our UK team can deliver'. £6bn
to the Revenue due to Taxpayer Inaction
Taxpayers in the UK will pay nearly £6bn too much to the Inland
Revenue over the next year, according to a new report. The survey from
TaxAction shows that three quarters of adults take no action to reduce
the amount of tax they pay, leaving the Revenue £5.7bn better off.
More than a third of this money is due to failure to plan ahead a reduce
the inheritance tax burden, with over 35,000 people expected to receive
an inheritance tax bill this year.
Other areas in which money is being wasted
include the failure to claim back tax on bank and building society interest,
and the failure for higher-rate taxpayers in company pension schemes to
top up their pension pots. 2005
Budget Date Announced
The Chancellor of the Exchequer, Gordon Brown, has announced that he will
deliver the 2005 Budget, his last before the general election, on Wednesday
16 March. A Treasury spokesperson confirmed that the Budget will be delivered
on 16 March at 12.30pm.
An election seems likely to be called soon
after Budget day, possibly immediately after Easter. In that event, a
short Finance Bill is likely to proceed quickly through Parliament, with
a second Bill following after the election.
Race
For Life
A team of five girls from Andrew Webster Limited have taken part in the
Race for Life 5km event in order to raise money for Cancer Research UK.
All five completed the course within half an hour and managed to raise
over £500 for the charity. We would like to say a big thank you
to all those who sponsored us for this event.
Mansworth
v Jelley court case affecting Share Options
This case has changed the rules for calculating the tax on your share
options. Although the case was decided more than 12 months ago many people
have not reclaimed their tax refunds. You will be affected if you:-
1) Exercised unapproved share options
2) Were otherwise given shares at less than market value
3) Were given share options whilst overseas which you exercised in the
UK
Many clients will see their tax liability
reduce significantly if they had capital gains. We have already helped
some clients save six-figure sums because of the ruling. If you think
you may be affected please call us on 01223 507080.
Husband & Wife Companies - The Arctic Systems Case Update 
The HM Revenue & Customs are challenging the tax planning of setting up companies in which both husband and wife are shareholders. This is applicable where income has been split between the partners to ensure that both have sufficient income to use their basic rate band. The HMRC have been successful in the courts in challenging one arrangement in the case of Jones v Garnett. 
Gordon Brown delivered his tenth budget as Chancellor on Wednesday the 22nd of March 2006. This was very much an electioneering budget for Gordon Brown with little substance. There were, however, a few hidden surprises.
Recent changes to the Pensions Scheme announced by the Chancellor in the Pre Budget Speech are set to cost Taxpayers in the Cambridgeshire area in excess of £120 million in potential tax savings.
