ContractStore Legal Business Blog

This advice comes courtesy of Accountants Chantrey Vellacott

You may be aware that major changes are going to apply to capital gains tax from 6 April 2008.  In particular there are two areas where action taken by 5 April 2008 could save you significant amounts of Capital Gains Tax  and how to take advantage of relief that will disappear after 5th April.
Indexation relief

Under the present system of capital gains tax, the value of assets (including shares) is indexed from 1982 or the later date of acquisition until 5 April 1998.  This prevents inflation over that period from being taxed.  This relief will no longer apply from 6 April 2008, even for assets already owned.  For an asset owned in 1982, indexation to 1998 effectively doubles the acquisition cost and reduces the capital gain.
It is possible to secure this relief simply by making a gift to your spouse, as gifts to spouses are deemed to take place at such a value that results in no gain and no loss, after taking indexation into account.

Business Asset Taper relief

For capital gains disposals after 5 April 2008 taper relief will cease to apply.  Under the present system, business asset taper relief can reduce the effective rate of capital gains tax to 10%.  Disposals after 5 April 2008 will be subject to tax at 18%.
If you have assets, including shares, that qualify for business asset taper relief and you expect to sell them in the near future, it is possible to bring forward a disposal such that the 10% tax rate applies.

Other scenarios where action may be beneficial include where the value of an asset at March 1982 was lower than the earlier base cost, or exceptionally where gains were held over between March 1982 and April 1988.

For more information and to contact Chantrey Vellacott: - http://www.cvdfk.com

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People who have had to stop working due to ill health will soon be able to get early assistance from the Financial Assistance Scheme (FAS) according to an announcement by the Pensions Minister, Mike O’Brien.

Draft regulations, published today for consultation, will mean people who have to stop working early because of poor health will be able to get payments from the FAS up to five years before their scheme’s normal retirement age.

Additionally, proposals in these regulations will speed up payments by including a requirement for trustees and other relevant people to provide information three months before a member’s normal scheme retirement age, or within 14 days of a request for that information where the member is unable to work due to ill-health.

The consultation document is available on the Department’s website at http://www.dwp.gov.uk/consultations/2008/

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Lawyers’ fees account for 40 per cent of the cost of claims paid by motor insurers. In an interview on the BBC today, a representative of the insurers suggested that claimants who do not use a lawyer are likely to get a more generous settlement than those who do, and claims can be settled more quickly.

There should, of course, be a system that provides a fair and speedy resolution of claims. But the fault is not all with the lawyers.  Insurance companies are not always as quick to pay out as their customers would like and, of course, insurance policies contain all sorts of exclusions designed to minimise the risks for the insurers - and which only come to light when the policy holder makes a claim.

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Budget 2008 - how it will affect you

The Chancellor’s Budget includes confirmation of the cut in the basic rate of Income Tax to 20 pence from 22 pence, a delay to the planned increase in fuel duty, and measures aimed at tackling climate change.

Personal taxation

A number of changes announced in last year’s Budget will come into effect from 6 April 2008 (the 2008/9 tax year):

• the basic rate of Income Tax falls from 22 per cent to 20 per cent
• the 10 per cent starting rate of Income Tax is abolished
• the personal allowance increases to £5,435; the age-related personal allowances rise to £9,030 for people aged between 65 and 74, and to £9,180 for those aged 75 and over

Child Benefit, Guardian’s Allowance and Tax Credits

Child Benefit for the eldest or an only child goes up 70 pence to £18.80 for 2008/09. For other children, the amount rises 45 pence to £12.55. Guardian’s Allowance increases 50 pence to £13.45. The ‘first child’ rate increases to £20 a week from April 2009. Also:

• the child element of Child Tax Credit increases by £150 a year
• the threshold for Working Tax Credit increases by £1,200 to £6,420

Pensioners

The Budget announced an increase of £100 to over-80s households and £50 to over-60s households in 2008/09, via their Winter Fuel Payment.

Savings

The overall annual investment limit for ISAs rises to £7,200, of which £3,600 can be in cash, from 6 April 2008.

The ten pence starting rate of tax is removed for non savings income and replaced with a new ten pence starting rate for savings income with a rate limit of £2,320.

Alcohol and tobacco

Alcohol duty rates increase from 17 March 2008. The duty increases will add four pence to the price of a typical pint of beer, 14 pence to the price of a typical bottle of wine, and 55 pence to the price of a typical bottle of spirits.

Duty on tobacco rises in line with inflation - 11 pence on a packet of twenty cigarettes.

Motoring and transport

The two pence per litre increase in fuel duty previously announced by the Chancellor has been delayed until 1 October 2008.

Vehicle Excise Duty (VED, or ‘car tax’) for the most polluting vehicles increases by £100 to £400 (for petrol and diesel cars in the graduated VED band G. Other bands see increases of £5).

The environment

From 2009, alongside the Budget there will be a five year carbon budget setting carbon emissions; and the long-term target for emissions reductions has been increased to 80 per cent by 2050.

Specific proposals include the introduction of legislation in 2009 to impose a charge on single-use carrier bags - the money raised would go to environmental charities.

The Stamp Duty Land Tax exemption for zero carbon homes is extended retrospectively to new flats from 1 October 2007

Charities and Gift Aid

The Budget announced a package of measures aimed at increasing the take-up of Gift Aid, including the introduction of a transitional rate of 22 per cent in 2008/09.

Measures were also taken to reduce burdens on charities, including reforms to the audit process and a programme for bringing more smaller charities into Gift Aid.

Inheritance Tax and Capital Gains Tax

Previous Budgets announced Inheritance Tax allowances - for 2008/09, the allowance is £312,000 for individuals and £624,000 for married couples and civil partners.

For more information go to: http://www.direct.gov.uk/en/Nl1/Newsroom/Budget2008/DG_073037

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An award of £25,000 damages for libel against a newspaper for a review by their restaurant critic was overturned by the Court of Appeal in Belfast this week.

The court ordered a retrial as they said the jury had been misdirected, with confusion between fact and comment in the article in the Irish News, which criticised the food, drink, staff and smoky atmosphere at Goodfellas restaurant.

This decision is seen as good news, not just for restaurant critics but other reviewers as well.

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Graham Calvert, the greyhound trainer who sued William Hill for letting him carry on betting when he had asked them not to, lost his case in the High Court today. The judge ruled that William Hill owed no general duty of care to Mr Calvert, who lost over £2 million with the bookmakers.

We hope Mr Calvert had some insurance to cover his costs - betting on the law can be very expensive!

You can read our previous story on this case that was posted on 16th February.

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