May 29, 2009Self-employment crackdown may lead to huge tax bill for construction industry
The taxman is to consult this summer on bringing forward rules to tackle what it calls "false self-employment", in a move that could land the industry with a bill for hundreds of millions of pounds.
Last week’s Budget contained the surprise announcement of a consultation on the issue, which has long been an irritation for the tax authorities.
HM Revenue & Customs believes many site workers are registered as self-employed when they should be employees, saving both the contractor and the worker thousands of pounds in national insurance contributions.
HMRC said it was looking to find a "long-term solution", a spokesman telling Construction News that it intended to consult "before the Autumn". The consultation will be on principles rather than on draft legislation.
HMRC wrote to 45,000 "sub-contractors" when it looked at the issue in 2004, who it believed should have been employees. If all were still affected, it is thought the bill for both contractors and workers could run into the hundreds of millions.
A note in the Treasury Budget documents said: "The Government remains committed to addressing false self-employment in the construction industry.
"The Government will consult with a view to future legislation to ensure that construction workers and those they work for are taxed appropriately."
Anne Redston, a tax expert who was involved in the last consultation on the issue, said: "It seems that in view of the fact we are severely short of money, the Government is looking to see what’s on the back burner [that they can bring forward]."
Alistair Gibson, the leader of Ernst & Young’s Construction Industry Scheme team, said: "I would rather we saw the revenue enable the industry to get over its current problems than look to impose yet more rules."
He added that, since one of the CIS’s main aims was to sort out employment issues, perhaps "this is an indication the scheme has failed."
The Government insisted it would work with the construction industry to ensure any legislation was effectively targeted and allowed the industry to retain a flexible labour supply.
Story from: Construction News
May 28, 2009Dangerous helplines
Professional advisers know that asking an HMRC helpline for advice is somewhat of a lottery. You may get the right answer, but you don’t know for certain that the answer is correct. The VAT helpline (The National Advice Service) has a particularly low reputation amongst tax experts.
One small company that rang the VAT helpline and regretted not asking a qualified tax adviser was Corkteck Ltd. The company was about to start selling bottled drinks to a customer in Poland, through a third company Sintra SA. Corkteck Ltd would deliver the drinks directly to Sintra’s customer in Poland, but invoice Sintra. The final Polish customer was registered for VAT in Poland, but Sintra SA was not.
Corkteck Ltd understood from the conversation with the VAT helpline that the export of the drinks could be zero rated if they recorded the VAT number and address of the final Polish customer on the invoice. However, on a VAT inspection the HMRC officer decided the zero rating was incorrect as Sintra was Corkteck’s customer, not the Polish company. This resulted in a VAT assessment for over £300,000 including penalties.
Corkteck Ltd lost its appeal against the VAT assessment, and lost the judicial review of its case. The judge said that the VAT helpline was only held out as a source of “general advice”, rather than as a source of binding rulings on the proper tax treatment of specific transactions. Corkteck should not have believed the advice given by the VAT helpline was a binding ruling. The judge went on to say that Corkteck Ltd should had put its question in writing to HMRC and made a full disclosure of all the facts.
Further reading: Corkteck Ltd v Revenue and Customs [2009]
Story from:
Tax Advice Network
May 18, 2009Accountants in demand during recession
Demand for people doing accountancy jobs and those with bookkeeping skills is on the rise, an expert in the sector has said.
Malcolm Trotter, chief executive of the International Association of Bookkeepers, pointed out that firms are more conscious of their finances during an economic downturn and require people to maintain up-to-date records.
“For people who are looking to give themselves more opportunity for the future, now is the time to go out there and do a bookkeeping course or to improve their skills in bookkeeping and accounting,” Mr Trotter advised.
Last month, a survey from the Association of Chartered Certified Accountants revealed that the demand for qualified accountants was rising rapidly around the world.
May 4, 2009Budget 2009 : 2009-10 Tax Tables
- Income tax, capital gains tax and inheritance tax
- Income tax: Taxable bands
- Corporation tax on profits
- National insurance contributions
- Working and child tax credits rates
- Child benefit and guardian’s allowance rates from 6 April 2009
- Stamp taxes and duties
- New leases
- Transfers of shares and stocks
Income tax, capital gains tax and inheritance tax
| £ per year (unless stated) | 2008-09 | Change | 2009-10 |
| Income tax personal and age-related allowances | |||
| Personal allowance (age under 65) | £6,035 | +£440 | £6,475 |
| Personal allowance (age 65-74) | £9,030 | +£460 | £9,640 |
| Personal allowance (age 75 and over) | £9,180 | +£460 | £9,640 |
| Married couple’s allowance* (aged less than 75 and born before 6th April 1935) | £6,535 | N/A | N/A |
| Married couple’s allowance* (age 75 and over) | £6,625 | +£340 | £6,965 |
| Married couple’s allowance* - minimum amount | £2,540 | +£130 | £2,670 |
| Income limit for age-related allowances | £21,800 | +£1,100 | £22,900 |
| Blind person’s allowance | £1,800 | +£90 | £1,890 |
| Capital gains tax annual exempt amount | |||
| Individuals etc. | £9,600 | +£500 | £10.100 |
| Most trustees | £4,800 | +£250 | £5,050 |
| Individual inheritance tax allowance | £312,000 | +£13,000 | £325,000 |
| Pension schemes allowances | |||
| Annual Allowance | £235,000 | +£10,000 | £245,000 |
| Lifetime Allowance | £1,650,000 | +£100,000 | £1,750,000 |
* Married couple’s allowance is given at the rate of 10%.
| 2008-09 | 2009-10 | |
| Starting rate: 10% | £0-£2,230 | £0-£2,440 |
| Basic rate: 20% | £0-£34,800 | £0-£37,400 |
| Higher rate: 40% | Over £34,800 | Over £37,400 |
* If an individual’s taxable non-savings income is above this limit then the 10% savings rate will not be applicable. There are no changes to the 10% dividend ordinary rate or the 32.5% dividend upper rate.
| £ per year (unless stated) | 2008-09 | 2009-10 |
| £0-£300,000 | 21% | 21% |
| £300,001 - £1,500,000 | Marginal relief | Marginal relief |
| £1,500,001 or more | 28% | 28% |
National insurance contributions
| £ per week (unless stated) | 2008-09 | Change | 2009-10 |
| Lower earnings limit, primary Class 1 | £90 | +£5 | £95 |
| Upper earnings limit, primary Class 1 | £770 | +£74 | £844 |
| Upper Accruals point | N/A | N/A | £770 |
| Primary threshold | £105 | +£5 | £110 |
| Secondary threshold | £105 | +£5 | £110 |
| Employees’ primary Class 1 rate between primary threshold and upper earnings limit | 11% | - | 11% |
| Employees’ primary Class 1 rate above upper earnings limit | 1% | - | 1% |
| Employees’ contracted-out rebate - salary-related schemes | 1.6% | - | 1.6% |
| Employees’ contracted-out rebate - money-purchase schemes | 1.6% | - | 1.6% |
| Married women’s reduced rate between primary threshold and upper earnings limit | 4.85% | - | 4.85% |
| Married women’s rate above upper earnings limit | 1% | - | 1% |
| Employers’ secondary Class 1 rate above secondary threshold | 12.8% | - | 12.8% |
| Employers’ contracted-out rebate, salary-related schemes | 3.7% | - | 3.7% |
| Employers’ contracted-out rebate, money-purchase schemes | 1.4% | - | 1.4% |
| Class 2 rate | £2.30 | +£0.10 | £2.40 |
| Class 2 small earnings exception (per year) | £4,825 | +£250 | £5,075 |
| Special Class 2 rate for share fishermen | £2.95 | +0.10 | £3.05 |
| Special Class 2 rate for volunteer development workers | £4.50 | +£0.25 | £4.75 |
| Class 3 rate (per week) | £8.10 | £3.95 | £12.05 |
| Class 4 lower profits limit (per year) | £5,435 | +£280 | £5,715 |
| Class 4 upper profits limit (per year) | £40,040 | +£3,835 | £43,875 |
| Class 4 rate between lower profits limit and upper profits limit | 8% | - | 8% |
| Class 4 rate above upper profits limit | 1% | - | 1% |
Working and child tax credits rates
| £ per year (unless stated) | 2008-09 | Change | 2009-10 |
| Working Tax Credit | |||
| Basic element | £1,800 | +£90 | £1,890 |
| Couple and lone parent element | £1,770 | +£90 | £1,860 |
| 30 hour element | £735 | +£40 | £775 |
| Disabled worker element | £2,405 | +£125 | £2,530 |
| Severe disability element | £1,020 | +£55 | £1,075 |
| 50+ Return to work payment (16-29 hours) | £1,235 | +£65 | £1,300 |
| 50+ Return to work payment (30+ hours) | £1,840 | +£95 | £1,935 |
| Childcare element of the Working Tax Credit | |||
| Maximum eligible cost for one child | £175 per week | - | £175 per week |
| Maximum eligible cost for two or more children | £300 per week | - | £300 per week |
| Percentage of eligible costs covered | 80% | - | 80% |
| Child Tax Credit | |||
| Family element | £545 | - | £545 |
| Family element, baby addition | £545 | - | £545 |
| Child element | £2,085 | +£150 | £2,235 |
| Disabled child element | £2,540 | +£130 | £2,670 |
| Severely disabled child element | £1,020 | +£55 | £1,075 |
| Income thresholds and withdrawal rates | |||
| First income threshold | £6,420 | - | £6,420 |
| First withdrawal rate | 39% | - | 39% |
| Second income threshold | £50,000 | - | £50,000 |
| Second withdrawal rate | 6.67% | - | 6.67% |
| First threshold for those entitled to Child Tax Credit only | £15,575 | +£465 | £16,040 |
| Income disregard | £25,000 | - | £25,000 |
Child benefit and guardian’s allowance rates from 6 April 2009
| £ per week | 2008-09 | Change | 2009-10 |
| Eldest/Only Child | £18.80 | +£1.20 | £20.00* |
| Other Children | £12.55 | +£0.65 | £13.20* |
| Guardian’s Allowance | £13.45 | +£0.65 | £14.10 |
* The child benefit rates increased from 6 January 2009, Guardian’s allowances from 6 April 2009.
Stamp taxes and duties
Transfers of land and buildings (consideration paid)
Until 31 December 2009
| Rate | Residential | Non-residential |
| Total value of consideration | ||
| Zero | £0 - £175,000 | £0 - £150,000 |
| 1% | Over £175,000 - £250,000 | Over £150,000 - £250,000 |
| 3% | Over £250,000 - £500,000 | Over £250,000 - £500,000 |
| 4% | Over £500,000 | Over £500,000 |
From 1 January 2010
| Rate | Residential in disadvantaged areas | Residential outside disadvantaged areas | Non-residential |
| Total value of consideration | |||
| Zero | £0 - £150,000 | £0 - £125,000 | £0 - £150,000 |
| 1% | Over £150,000 - £250,000 | Over £125,000 - £250,000 | Over £150,000 - £250,000 |
| 3% | Over £250,000 - £500,000 | Over £250,000 - £500,000 | Over £250,000 - £500,000 |
| 4% | Over £500,000 | Over £500,000 | Over £500,000 |
Duty on the premium is the same as for transfers of land (except that special rules apply for non-residential land and property premium where rent exceeds £1,000 annually. The rules no longer apply to residential property). Duty on the rent is charged on any part of the net present value (NPV) which exceeds the threshold.
| Rate | Net Present Value of rent | ||
| Residential in disadvantaged areas | Residential outside disadvantaged areas | Non-residential | |
| Slice of NPV | |||
| Zero | £0 - £150,000 | £0 - £125,000 | £0 - £150,000 |
| 1% | Over £150,000 | Over £125,000 | Over £150,000 |
Transfers of shares and stocks
The rate of stamp duty / stamp duty reserve tax on the transfer of shares and securities is unchanged at 0.5 per cent for 2009-10.
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Latest Comments
By kesciseAvoito
Thank you very much for this interesting article.
By Bob Hairstyles
If he doesn't know what he is doing, mutual fund is the way to go. That might be counted as cheating