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The dregs of the year

1st Mar 2010
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Are you ready for the challenge presented by the last month of the tax year? It's an unprecedented opportunity for some, but where should you start?

March may be a time when your firm starts to prepare for the year end filing season for payroll, but this year as no other it is a time to reflect both on the year past and the year to come. We are at a unique point in many ways – a position that will not come this way again for many years.

Professionally we have only a day or so to influence the outcome of the 'Working with agents' consultation. Although the consultation on the draft legislation still has quite a time to go – the deadline having been extended to 28 April – the main consultation closes on 3 March. If you haven’t yet had your say then you might find our Roadmap and associated detailed articles on the main issues useful – there are links included in the articles which will allow you to email a response directly. We are encouraging members to respond directly to HMRC as making a response which sums up everyone's views has proved quite difficult in the past, as many of you hold different points of view on this.

Practically, we need to be preparing for the next part of the Carter initiative with both online filing of P35s rolled out to small employers and VAT Online coming within the next few months. Many small practices will find that clients are not ready and need some extra support to join the online revolution.

Technically, of course, we are in a unique position. Planning for the end of the current tax year, and forward planning for the next tax year should be your focus as never before. We face a significantly more aggressive tax regime next year than we have for many years, and clients will be able to see the benefits that pro-active tax advice can bring. Whether it is the very profitable client who needs advice about sheltering income from 50% tax, or the small business which is currently trading as a limited company and wondering whether limited company status is still right for them you have a wide range of clients needing advice. Looking back over 2009/10, you will need to ensure that those clients who traditionally invest in pensions at this time of the year do not fall foul of the anti-forestalling rules – and even if you checked the position on those earlier in the year after the Finance Act 2009 was published, you now face repeating the entire exercise using the new income limit of £130,000 announced in the Pre-Budget Report.

Forward planning

Looking forward to 2010/11, the anti-forestalling rules will be with us again, so clients will need advice about pension contributions again (including those who have their own company available to make contributions for them) and you will be particularly aware of the marginal tax benefits of making donations to charity by those with income in the band £100,000 to £112,950 – these clients will need to get a fix on their income as soon as possible after the end of 2010/11 to establish whether any donations should be carried back to obtain maximum benefit. Whoosh – was that the sound of another tax year zooming by?

Urgent advice

There are also some key issues to focus on now. If you have any clients in the furnished holiday lettings business, it is absolutely essential that you contact them regarding capital allowances as we move from the deemed trade treatment of the activity to investment letting. Failure to contact clients before the end of the tax year could have serious consequences – clients could rightly be very disappointed if they lose out on the golden opportunity available only until 5 April.

You must also be extremely careful when accelerating income into the current tax year to avoid 50% tax next year. In all of the commentary in the press on this there is scant mention of the parallel danger – that of triggering the pensions anti-forestalling rules which might otherwise not apply!

And finally, news this weekend that an incoming Conservative government would reduce both the small company rate of Corporation tax to 20% and the main rate to 25%, but would pay for it by abolishing the Annual Investment Allowance must also be music to the ears of the year end tax adviser! Make sure that any clients intending to invest in equipment over the next year or so are warned that now rather than later would be an excellent move, with the availability of the AIA under threat, and first year allowances of 40% also available for just one more month. A spend of £500,000 now would attract £230,000 in capital allowances, but later this could be as little as £100,000 – all the more reason to be pro-active with your tax advice.

How can help

AccountingWEB Tax Essentials are time-sensitive products which provide all of the technical background to key advice issues for your practice, together with letters for clients which will enable you to deliver the advice and bill for it. The products ensure that specific advice points are not overlooked by the busy practitioner, and more importantly that delivering this advice highlights to your client the added value you can provide for a modest fee (£95 each). We currently have on sale 'Furnished Holiday Lettings – Stunning End Game Strategies' for which a free webchat will be available on Thursday 4 March, but you will need to buy before midday on 4 March to join. This will be withdrawn from sale on 14 March. Our new title is 'Year-End Tax Planning Guide 2009-10', which provides a range of year end tax planning advice including a step-by-step guide to the pensions anti-forestalling provisions, and detailed advice for high earners in 2010/11. There is also a wealth of other year end tax planning points, and a letter for you to use to contact clients regarding the advice you wish to deliver. This publication will be updated free of charge for any Budget announcements – although by then time will be very short to implement any advice you may wish to deliver; it will be withdrawn from sale on 31 March.

Replies (2)

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By miketombs
02nd Mar 2010 13:15

Bit worrying....

I was a bit worried that George Osbourne found the Annual Investment Allowance 'complicated and difficult to understand'.

Thanks (0)
By User deleted
05th Mar 2010 15:22

only a Puppet

He is only a puppet.

We could do with some MPs that understood the legislation they were voting on.

They didn't understand wholly exclusively and neccesarily either.

or Evasion and avoidance.

Still like most of these new fangled tax Ideas they will not be here five minutes before some idiot decides its time to change again.

No direction just a change ! After all I am sure that is what they see their role in society as.

Vote for change ! Total change, [***] deal change all of them !

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