A Great Day for Bingo & Boilers

Posted by on December 10, 2009 2:19 PM | Permalink

What do bingo and boilers have in common....?

Well, they were both given tax breaks in yesterday's pre-budget report. Bingo duty was cut from 22% to 20% and if you scrap your domestic boiler you may be in line for a ÃÂ£400 tax reduction.

These were a few of the more obscure measures announced by Alistair Darling yesterday.

The upcoming year is likely to be very interesting from a tax perspective. As we move towards the general election and the possibility of a new government, there will be perhaps 2 or 3 Budgets and in my ongoing blog I would like to keep you updated on how any changes in tax will affect you.

I work as a tax partner In Deloitte Newcastle. I have been with the firm for my whole working life. Being originally from Durham I returned to the North East after university and wouldn't have wanted to work anywhere else.

I lead our Entrepreneurial business tax team dealing with all aspects of the personal and business tax. I enjoy working with owner-managers helping them expand their businesses, create jobs and promote the North East.

So to get started, I had a very interesting day yesterday taking in the announcements of Alistair Darling in his pre budget report followed by a get together with a local bank (who gave some interesting personal insights following Darling's new "bankers tax")

However, whilst all the headlines have centred on additional tax on banker's bonuses and those who earn the most, undoubtedly the biggest impact from a tax perspective was the additional 0.5% increase on National Insurance Contribution (NIC) rates to apply from April 2011.

This comes in addition to the planned 0.5% increase announced previously, and following the alignment of tax and National Insurance bands means that most will effectively pay an additional 1% in "tax" on their salary raising about ÃÂ£7 billion for the government in 2011-12. This means that all employees earning over broadly ÃÂ£40,000 face an uncapped 2% NIC charge on all their earnings.

Employers, who were already bracing themselves for the headline employer rate moving from 12.8% to 13.3% in 2011, will be disappointed by the further increase to 13.8%. Undoubtedly, many employers will try to mitigate the impact of this rate increase by using salary sacrifice arrangements, to ensure that the overall pay and benefits package is more tax efficient and although targeted measures were announced today in relation to free food provided in workplace canteens, it is encouraging that the general principle of salary sacrifice remains intact.

Restructuring employee remuneration using salary sacrifice to provide low-tax benefits has been and continues to be an important tool for employers seeking to deliver increased take home pay in difficult times and is something I have put in place for a number of my clients.

Leaving aside the NIC increases, there are some pleasing measures for entrepreneurial businesses on the whole. For starters, the small companies rate will be held at its current level of 21% for 2010 (the increase to 22% has been deferred). Additionally the extension to HMRC's Business Payments Service will be welcomed by those businesses facing cash flow difficulties. To date more than ÃÂ£4 billion in tax has been deferred, although of that, ÃÂ£2.5 billion has now been repaid.

An additional year's exemption from business rates for empty commercial properties will also be available to business people with the relief extending to properties with rateable values up to ÃÂ£18,000.

There is also good news for small and medium companies involved in Research & Development activities - from yesterday they can claim R&D relief at 175% even if they don't own the underlying Intellectual Property created. This is a really big deal for the right companies, especially as they can still swap the R&D losses for cash. In addition to this, Income from patents will be taxed at just 10%,( costing the Treasury ÃÂ£1.3 billion per annum). Although a good idea, the slightly disappointing aspect is that it will only apply from 2013, is restricted to patents granted after Finance Bill 2011, and doesn't seem to extend to other forms of Intellectual Property such as copyright and trademarks. Nevertheless, along with the R&D change, this will help regional technology businesses to remain competitive internationally.

Interestingly the speculation around the potential increase in capital gains tax rates for individuals seemed to be a non starter with no mention of such an increase announced.

The freeze on personal allowances and rate bands, which usually increase each April will hit people's pockets by increasing the amount of tax that they have to pay. The 2010/11 levels applying from next April will remain at the levels applying to the current 2009/10 tax year. However, increases to child and working tax credits and increasing the availability of the WTC to the over 65s should help provide support to lower income families.

Finally, despite lobbies form retailers, VAT will return to 17.5% after 1 January 2010, so just 22 shopping days left to take advantage of the 15%!

I will keep you updated on any further interesting tax points as they arise.....