Business Breakfast Budget Impact June 2010

Finance Bill June 2010 Implications Ian Cattell ACA Partner – Crombies Chartered Accountants ©2010 Crombies Accountants Limited. All rights reserved.

CONTENTS The Budgetary Environment UK Plc – Financial Report The office for Budgetary Responsibility Business Tax Proposals VAT Corporation Tax Capital Allowances Personal Tax Proposals Income Tax Capital Gains Tax The Tax Compliance Environment Any questions? ©2010 Crombies Accountants Limited. All rights reserved.

General disclaimers We are not authorised to give investment advice We make general comments only – not specific advice Everyone’s financial affairs are different – what is best for the “man in the pub” may not be best for you Tax legislation changes constantly so review your circumstances regularly And Remember – Don’t let the tax implications distort the commercial and practical considerations The Finance Bill is not yet law. The final provisions enacted in any Finance Act may differ considerably from The Chancellors initial presentations. ©2010 Crombies Accountants Limited. All rights reserved.

The Budgetary Environment The Micawber Principle "Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery ©2010 Crombies Accountants Limited. All rights reserved.

UK Plc – Financial Report Total Government Income £515.3 Billion Total Government Expenditure £671.4 Billion Net Borrowing £156.1 Billion (11.09% GDP) New Coalition government’s stated intentions : - To reduce deficit in ratio 80%:20% Expenditure cuts : Tax rises - To reverse planned National Insurance increases (Tax on jobs) - To increase the Income Tax Personal allowance (Target £10,000 pa) - To reduce rates of corporation tax - To target tax avoidance involving conversion of Income to Capital Gains Spending cuts won’t be announced until the Autumn Spending review. ©2010 Crombies Accountants Limited. All rights reserved.

UK Central Government Deficit 36.8% 47.7%

How the deficit is expected to fall

Amounts raised in Taxation HM Revenue & Customs – Tax Receipts

Budget June 2010 Business Tax Proposals Jean-Baptiste Colbert The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least amount of hissing. ©2010 Crombies Accountants Limited. All rights reserved.

Business Taxation CORPORATION TAX Point 1 Point 2 Rates of Tax 2009/ / /12 Small Company On first £300, %20%20% Marginal Rate On Next £1,200, %30%30% Higher Rate Above £1,500, %32.5%32.5% Point 4 Point 5 ©2010 Crombies Accountants Limited. All rights reserved.

Value Added Tax Point 1 Point 2 Rates of Tax 2009/ / /12 Small Company On first £300, %20%20% Marginal Rate On Next £1,200, %30%30% Higher Rate Above £1,500, %32.5% 32.5% Point 4 Point 5 ©2010 Crombies Accountants Limited. All rights reserved.

The CGT Calculation ©2010 Crombies Accountants Limited. All rights reserved.

When is CGT payable CGT arises on the disposal of a chargeable asset (eg Property). Disposal Includes. –Sale - at arms length or otherwise –Gift –Settlement Certain disposals have special treatment –Transfers between husband and wife – No gain / No loss –Transfers or Gifts to Connected Persons – Deemed market value –Transfers where IHT is potentially payable The following are not disposals for CGT purposes –Mortgage or re-mortgage of property –Death ©2010 Crombies Accountants Limited. All rights reserved.

Some Simple CGT Planning points Consider holding properties jointly so that two annual exemptions are available on sale Husband and Wife – transfer properties into joint names Plan the timing of disposals to make use of exemptions and use losses effectively Keep financial records. – This is a legal requirement, but also crucial for claiming incidental costs. Don’t let CGT planning give you an IHT problem - remember the “Tax Free Uplift” on death ©2010 Crombies Accountants Limited. All rights reserved.

Budget June 2010 Personal Tax Proposals Albert Einstein The hardest thing in the world to understand is the income tax. ©2010 Crombies Accountants Limited. All rights reserved.

Capital Allowances Point 1 Point 2 Rates of Tax 2009/ / /12 Small Company On first £300, %20%20% Marginal Rate On Next £1,200, %30%30% Higher Rate Above £1,500, %32.5% 32.5% Point 4 Point 5. ©2010 Crombies Accountants Limited. All rights reserved.

The Tax Compliance Environment Mark Twain The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin. ©2010 Crombies Accountants Limited. All rights reserved.

HMRC Compliance Environment HMRC are targeting in their Published Business Plan an increase of 33% in amounts raised from Inspections & Investigations. In 2010/11 this would amount to £4bn. Of which £1.5bn assumed from small business and personal tax enquiries. New Penalty Regime. From April 2010 assumption is that enquiry amendments will carry a penalty of at least 20%. (Previously Nil) Increased use of informal enquiry powers outside of the usual “Enquiry windows” Increased use of “Multi-disciplinary” teams. Cross referencing between what were previously separate departments. Utilization of new information sources – Bank data; Land Registry; Benefits Agency; Property Letting Agents; Stock Brokers; Solicitors. PAYE, CIS, VAT, Stamp Duty Penalties all increased substantially. ©2010 Crombies Accountants Limited. All rights reserved.

Any Questions ? Concerns about TAX ? We have the FA TS RELAX