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Managed Service Companies to pay more in tax

From 6th April 2007, PAYE will be applied to all payments made to individuals by Managed Service Companies. NIC will be applied after the Finance Bill becomes law. The Government believe that these companies have been used to get around “IR35” and avoid PAYE/NIC on employment income, by those who would have been classed as employees had there been no company in place.
New legislation will specifically target Managed Service Companies, and prevent employees from claiming the costs of travelling to and from each engagement as an allowable expense.
It is proposed that any unpaid tax and NIC may be recovered from other parties, whether involved directly or indirectly, where the Managed Service Company does not pay.

Buy your Foreign Property in a company


The budget proposes to remove the possibility of a tax charge for individuals using a company solely to buy property abroad. Subject to certain conditions the budget proposes to bring in a retrospective relief to allow individuals to set up a company to purchase property abroad for their own use without them suffering a benefit in kind. Although the legislation will not be introduced until 2008, the budget states that they will not seek to charge a benefit-in-kind in the interim where certain conditions are met.

Benefits provided by former employers now tax free


Legislation is to be introduced to exclude from taxation minor benefits provided by former employers to retired former employees. Once the regulations come into force, the exclusions will be backdated to 6 April 2006.

National Minimum Wage increases


From October 2007 the adult rate for the national minimum wage will increase to £5.52 per hour (£4.60 per hour if between 18 and 21, and £3.40 per hour if 16 or 17).

Company Cars


The company car tax and fuel rates remain the same for the 2007/2008 tax year. From 6th April 2008 cars that have been manufactured to run on E85 fuel will enjoy a 2% discount from the appropriate percentage used for the car benefit. E85 is the term used for motor fuel blends of 85 percent ethanol, and is an alternative fuel being promoted as completely renewable.