Quick Tax Tips and Hot off the Press

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As a Birmingham Accountant we're well placed to handle clients across the West Midlands. With offices in a number of major towns in the local area as well as Birmingham itself

Quick Tax Tips and Hot off the Press_5

QTT – All is not lost on death!

Should someone pass away creating an Inheritance Tax bill on their estate, there may still be action that can be taken. Providing all of the beneficiaries of the deceased’s estate agree, then a “deed of variation” can be executed within two years of the death. Getting agreement of all beneficiaries can often be the biggest problem.

Whilst there is no substitute for having a correctly drawn up tax efficient Will in place, the deed does allow one last chance to reorganise estates and perhaps save Inheritance Tax. The deed can vary where the estate goes, as if the deceased had given the instruction. This may be possible, even when there was no Will in place.

QTT – Employees can save money on pension contributions!

Payments by an employee into a private pension scheme are often made out of income that has had tax and national insurance deducted. Where the employer makes the contributions direct (employer contributions) there are immediate national insurance savings for both the employee and employer. This may be far better than most other perks.

If “normal salary” is to be sacrificed to make employer contributions, please talk to us. There are hurdles to jump and paperwork required in order to make sure the salary sacrifice scheme works.

QTT – Shattering the tax myths – Students don’t pay tax

Tax myths are creating problems in an already confusing tax system. In each edition we will unravel a well known tax myth and give you the truth. The myth for this edition is that “students don’t pay tax”.

Unfortunately this is not true. Students are entitled to the same personal allowance as other individuals (currently £5,225). If their total income exceeds this allowance then they may well be liable to extra tax.

Students who are employed during holidays may well be asked to complete and sign a P38S. The form merely states that the student confirms that their income with the holiday work will not exceed the personal allowance and allows the employer to pay the student without the deduction of tax or national insurance. If their earnings exceed the appropriate limits then tax and national insurance will be paid in the same way as for other employees.

QTT - Take care with Stamp Duty Land Tax!

If you are considering the purchase of property don't forget the imposition of Stamp Duty Land Tax (SDLT), currently chargeable at up to 4% of the purchase price (inclusive of VAT, if applicable).

When purchasing property there is often a temptation to allocate the cost between the actual building and the fixtures in such a manner as to minimise the SDLT due on the structure. Careful consideration is required prior to drafting contracts as this strategy could not only reduce the available tax relief now, but potentially increase the tax bill on the eventual sale of the building.

HOP – Cost of protection set to increase in October

Before October 2007 you can set up an Enduring Power of Attorney (‘EPA’) with professional support relatively cheaply. Essentially an EPA is a formal document that nominates a trusted individual to deal with your financial affairs and property, in the unfortunate event of you being incapacitated, either physically or mentally. An EPA makes things so much easier for your family, and is a very important part of good financial management.
After October 2007, however, if you haven’t already created an EPA, to achieve the same protection for your family you will need to create a new style “Lasting power of attorney” – and these are widely expected to be much more expensive. Therefore, if you don’t have an EPA already, we strongly recommend that you consider having one drafted before October 2007.

HOP – Fuel rates for company cars increase from 1st August 2007

HM Revenue and Customs have issued new advisory fuel rates for use from 1st August 2007. Where employees are provided with a company car and they are reimbursed a mileage rate to cover the fuel used on business journeys, or employees are required to reimburse the employer for fuel used on private journeys then the advisory rates are normally used. Records of the journeys and payments need to be maintained to ensure that tax bills don’t arise on the mileage reimbursed or fuel paid respectively.
These rates apply to all journeys on or after 1 August 2007 until further notice:
Engine Size Petrol Diesel LPG
1400cc or less 10p 10p 6p
1401cc to 2000cc 13p 10p 8p
Over 2000cc 18p 13p 10p
Petrol hybrid cars are treated as petrol cars for this purpose. The rates are not binding, and where actual costs can be demonstrated to be different these can be used instead by agreement with your local tax office.

HOP –Get tax back on plant integral in your building!

The rules regarding capital allowances has become a complex area and interpretation of the legislation has changed a number of times. Therefore many claims on buildings are now possible that simply were not in the past. We can now offer reviews of business property that could result in tax repayments of thousands in tax. So if you have a commercial property, and would like to save tax then please contact us. The impact of the tax savings are to reduce from 2008 and so action should be taken now.

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