Uncertainty over CGT causing chaos.

CBI chief Richard Lambert has claimed that uncertainty over whether or not the government is to introduce controversial capital gains tax (CGT) changes has led to many entrepreneurs considering selling their companies for reasons other than business.

The director-general of the employers' organisation launched a renewed attack on ministers saying the Treasury's delay in making a final decision on the issue has left business in a "state of complete confusion".

The criticism is among the fiercest yet since the CGT changes were announced last October. Following the wave of outrage which it provoked among the small business community, Chancellor Alistair Darling agreed to listen to concerns. He promised on 27 November that an announcement would be made within three weeks but so far nothing has been revealed.

Speaking on BBC Radio 4's Today programme, Lambert said: "If you have been building up a business over donkey’s years and you suddenly face the prospect of a higher tax bill, you have to think now about whether you're going to get out of it. That's what people are doing. They are beginning to take decisions that have nothing to do with business or economic common sense. They are doing it because they don't know what their tax liabilities are going to be."

Under the proposed changes, CGT would be raised for people selling businesses or shares after 5 April but decreased for those getting rid of second properties.

Lambert said it was "completely and utterly crackers" that buy-to-let investors would have the same tax level as somebody who had built a successful business over several decades.

"People who've been at the CBI longer than I have say they can't remember anything which made people quite as annoyed and angry as this decision," he added.

On line Christmas Shoppers to spend £1.8 billion.

This Christmas consumers will spend £1.8bn online according to the British Retail Consortium (BRC).

The BRC believe that online purchases will account for around 15% of the total £12bn predicted to be spent on Christmas related products. The overall figure is a rise of £200m compared to the festive season last year when the internet was responsible for 13% of all purchases.

However, with most of the consumers shopping online intending to spend roughly the same amount as last year, the retail organisation said the majority of growth will come from an increase in the number of web shoppers, rather than an increase in spend.

The BRC estimated that each online shopper will spend an average of £70, compared with an average spend per head of £365 in stores and the internet has become an important tool when comparing prices, with 63% referring to the internet before making a purchase, up from 35% in 2006.

Kevin Hawkins, BRC director general, said: "This Christmas the internet will be a more important channel than ever, as consumers take advantage of retailers' improved on-line offers, increased security and cheaper broadband. There will be intense competition for online spending, with retailers vying for a share of this valuable channel, which is very much complementary to traditional methods of buying."

 Pre Budget Highlights.

Tax rates for 2008/09

• The government proposes to change the tax rates for 2008/09 onwards when the 10% starting rate will be abolished for earned and pension’s income and the 22% basic rate of tax will be reduced to 20%. The higher rate of tax will continue at 40%. 

• The starting rate will continue to be available for savings and investment income and there are no changes to the tax rates applicable to dividends. 
• Details of the income tax bands are normally made available in the main spring Budget.

VAT and housing

• VAT is currently chargeable at 5% on renovations or alterations to residential properties that have been empty for at least three years. Eligibility for this reduced VAT rate will, on and after 1 January 2008, apply to renovations or alterations carried out to residential properties that have been empty for at least two years.

Capital gains tax (CGT) reform

• There were some major changes to the CGT regime. Legislation will be introduced next year to apply a new, single rate of charge to CGT at 18%. A number of changes will be made for disposals made on or after 6 April 2008 to simplify the capital gains tax regime, including:
  - the withdrawal of taper relief
  - the withdrawal of indexation allowance
  - simplification of the share identification rules. 

• The current regime of an annual exemption allows the first element of chargeable gains made in a given tax year to be exempt from CGT. An annual exemption will remain in place for 2007/08 which is currently £9,200. 

• For individuals capital gains are currently treated as the top slice of income. This means that tapered gains are charged at 10% where gains plus taxable income do not exceed £2,230; 20% between £2,231 and £34,600; and 40% on any balance. For trustees the rate of CGT is 40%.

• For 2008/09 there will be a single rate of capital gains tax set at 18%, which will apply to individuals, trustees and personal representatives.

Inheritance tax (IHT) threshold

• The IHT nil rate band was increased to £300,000 with effect from 6 April 2007.
  Transfers of property between spouses or civil partners are generally exempt from IHT which means that if an individual dies and leaves some or all of their property to their spouse or civil partner, they may not have fully used their nil-rate band.
  The new rules allow any nil-rate band unused on the first death to be used when the surviving spouse or civil partner dies. The transfer of the unused nil-rate band from a deceased spouse or civil partner, irrelevant of the date of death, may be made to the estate of their surviving spouse or civil partner who dies on or after 9 October 2007.
  The amount of the nil-rate band available for transfer will be based on the proportion of the nil-rate band which was unused when the first spouse or civil partner died.

Company cars and the fuel scale charge

• Where a car is provided for an employee’s private use, there is a taxable benefit based on the list price of the car and its CO2 emissions. Percentages range from 15% to 35% for most cars and there are currently discounts available for environmentally friendly cars. From 6 April 2008 there will be a 2% discount for cars that have been manufactured to run on E85 fuel.
  If free fuel is provided for private motoring then a fuel benefit tax charge is applicable which is based on the percentage used for the car benefit and a ‘multiplier’, which is currently £14,400.  For 2008/09 the figure will increase to £16,900.

Payments on account threshold

• Individuals completing a self assessment tax return have to make payments of their income tax and Class 4 national insurance contributions direct to HMRC. Payments on account are made on 31 January and 31 July each year with a balancing payment for the tax year being made by 31 January following the end of the tax year.  The payments on account are broadly made by reference to the previous year’s liability and are not due where more than 80% of the previous year’s liability was met by tax deductions at source i.e. income from employment or savings.
  Currently, if the previous year’s liability is less than £500 no payments on account are due and the taxpayer just makes one payment on 31 January following the end of the tax year of their full liability. From 2009/10 the £500 threshold will be doubled to £1,000.
  The first payment on account affected by this change will be those due on 31 January and 31 July 2010.

National minimum wage.

Employers are reminded that October 1st brings a change in the National Minimum wage.
The main rate for workers aged 22 and over is currently £5.35 an hour which will increase to £5.52 on 1 October 2007. The development rate for 18-21 year olds is £4.45 an hour, rising to £4.60 an hour in October and the rate for 16-17 year olds is £3.30 an hour, increasing to £3.40 in October 2007.
 
Failure to comply with the National Minimum wage could result in prosecution by HMRC, who recently secured their first criminal prosecution that saw the employer found guilty and being fined £2500 with £500 costs.
 
Andy Millican, Criminal Investigation Team Leader for HM Revenue & Customs said: "This prosecution sends a clear message to employers that HMRC and RCPO will actively pursue those we suspect of flouting National Minimum Wage law. If employers obstruct us and refuse to comply with the law they could receive a fine and a criminal record."
The six potential criminal offences under section 31 of the NMW Act are:
- Employer refuses or wilfully neglects to pay NMW
- Person fails to keep or preserve records
- Person knowingly causes or allows false entry in records
- Person produces or furnishes false records or information
- Person delays or obstructs compliance officer
- Person refuses or neglects to answer any questions or produce documents for compliance officer
 
Each criminal offence carries a maximum £5,000 fine and a criminal record.
 
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Back to School with Tax Credits

With the kids back at school, and college and university courses starting soon, parents receiving tax credits are being reminded that they need to let HM Revenue and Customs (HMRC) know of any changes in their circumstances.
 
For example, if you've a child over 16 who's started, or is about to start, further education at school or college, make sure you call HMRC as soon as possible and let them know. Otherwise, it could mean you're missing out on extra money.
And if you told HMRC your child was staying on at school or college after their exams and they've since changed their minds, contact them now, so they can update your claim.
 
Also, if your childcare costs, the hours you work, or the amount you earn changed after the kids went back, HMRC needs to know that too.
 
In fact, if you're receiving tax credits, it's important to let HMRC know as soon as you can about changes in your circumstances, whatever the reason or time of year.