VAT element of Act does not compute
It’s holiday season which means all the MP’s are on their hols as Parliament is now in recess for the summer. They do not return until the middle of October, giving them in total an incredible 13 weeks off!
One of the last bills to be passed before the summer was The Finance Act. This provides the legislation to the budget which was announced on the 22nd April.
This year’s Finance Act includes the provisions for both the new 50% tax rate from 2010/11, affecting everybody who earns more than £150k and the new effective 60% rate of clawback of personal allowances for everybody who earns more than £100k. With these two significant changes it should be consider whether there is any planning which should be carried out? i.e. whether dividends should be brought forward or should an accounting reference date be changed.
It is not just the well off who should be considering tax planning exercises. Anyone who earns more than £25k will probably see a benefit if they are carrying on as a sole trader or partnership by turning their business in to a limited company. This generally remains a worth while exercise as spouses can still be used for effective tax planning.
Two key elements have not been mentioned in the Finance Act. Firstly the budget announced that tax breaks for renting holiday homes were to be withdrawn from April 2010. This could increase the rate of Capital Gains Tax on such properties from 10% to 18%. However, the Act is unclear as to how this will be applied and if they choose to keep details on this secret tax bills could increase.
The second key element to have not received a mention is the VAT rate. In the PreBudget Report it was announced that the rate would go back up to 17.5% from 1 January 2010, however the Finance Act leaves this wide open and only legislates for the government to do this whenever they want and to what ever rate they want. Retailers have said they do not want the rate to go back up on 1st January as who are they going to get to change their computers on New Year’s Eve!
Biggleswade Chronicle - 7th August 2009