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year end planning april 2010

Planning around 5 April 2010 tax year end

The end of the tax year has always been seen as a good time to look at your financial affairs. Opportunities need to be taken now or some will be lost forever. Action now may give you cash flow advantages. Announced tax changes mean that this year, more so than in recent years, you may have the opportunity to arrange your affairs to improve your tax position for the next year.

AstraZeneca pays £505m to settle long running UK tax dispute

Further evidence of the tough line that tax authorities are taking in relation to transfer pricing was revealed today with AstraZeneca announcing that it has paid £505m to settle its long running UK tax dispute.

Withdrawal of higher rate tax relief for childcare provision

Following the December 2009 announcement regarding the future restriction of tax relief on the provision of childcare and childcare vouchers, on 19 February 2010HM Revenue and Customs published a Technical Note on the proposals.

Change to penalty position for late paid PAYE and National Insurance

A new penalty regime is being introduced in relation to the late payment of tax and Class 1 National Insurance (NI) which are collected via the PAYE system. The new regime will also apply to late paid Classes 1A and 1B NI, amounts due under the Construction Industry Scheme (CIS) and to Student Loan deductions. The new system will come into effect from 6 April 2010 and will affect payments due to be made from May 2010 onwards.

HMRC restricts the tax exemption for workplace canteens

Currently no tax charge arises on the provision of meals for directors or employees provided in a canteen or on the employers premises when certain conditions are met. Remuneration arrangements involving salary sacrifice or flexible benefits schemes have developed to take advantage of the exemption and allow employees to purchase meals from gross rather than net pay. These arrangements provide employees and employers alike with a tax and NI advantage.

Government concession on withdrawal of tax relief for childcare vouchers

The Prime Minister announced on 3 December that the Government’s plans to withdraw tax relief for childcare vouchers will be withdrawn and that tax relief on childcare vouchers will remain, albeit at the basic rate of tax for employees first taking vouchers after 2011.

Restricted tax relief for pension contributions – will this affect you?

Individuals with “high income” may have tax relief for some of their pension contributions, or increases in pension fund benefits, capped at the basic rate of income tax. The Finance Act 2009 has added a new tax: the pensions “special annual allowance charge” (SAAC). When this tax charge applies it restricts the amount of higher rate tax relief on contributions paid into a pension scheme, or taxes part of the increase in benefits within a final salary scheme for the benefit of higher earners. This SAAC is an actual cash tax charge payable by the high-income individual. The SAAC applies for the tax years 2009/10 and 2010/11. The rules are complex and contain traps for the unwary.

VAT – Anti-forestalling legislation

The temporary reduction in the VAT standard rate to 15% is due to end on 31 December 2009 and HM Revenue and Customs (“HMRC”) have published guidance based on the assumption that it will revert to 17.5% on 1 January 2010.

Holding on - The transitional CFC exemption for holding companies

Rosemary Blundell, National Tax Director of Mazars LLP, explains why international groups should hold on to the transitional CFC exemption for holding companies.

Movers & Shakers

Rosemary Blundell and Richard Service examine the latest position on cross-border group relief within the EEA

HMRC issues draft guidance on exemption from tax of UK companies’ dividend income

HMRC have now issued draft guidance in respect of the distribution exemption introduced with effect from 1 July 2009. It is unclear when the final guidance will be available. Although in many places the draft guidance does not add significantly to the explanatory notes released with the Finance Bill, there are nevertheless a number of areas which highlight HMRC’s interpretation or reflect discussions held by HMRC following the publication of the Finance Bill, and it is a useful source of reference.

Restriction of UK companies’ tax deductible finance cost

Starting with accounting periods beginning in 2010, companies which are members of a group which has at least one non UK member may suffer a new restriction to the amount of their finance cost that they can deduct for UK tax purposes. This restriction in tax deducible interest and other finance expense was originally referred to as the worldwide debt cap, but it is more a worldwide interest cap.

Furnished Holiday Lettings - Don’t miss opportunity for tax repayment

Furnished holidays lettings (‘FHL’) attract special tax treatment - but this has always previously been limited to UK properties. However, in the Budget it was announced that the tax advantageous treatment is being retrospectively extended to cover properties situated within the European Economic Area (EU plus Norway, Iceland and Liechtenstein).

VAT: New rules for cross border services from 1 January 2010

A new EU directive has been adopted which will mean that from 1 January 2010, there will be new VAT rules relating to the supply of services across the EU. Instead of the current basic rule that the place of supply of services is treated as being where the supplier is established, the place of supply for most services will shift to the country where the customer is established.

Foreign Profits Reform – Finance Bill 2009 Update

The Finance Bill 2009 includes draft provisions at Schedules 14 to 17 in respect of the proposed reforms of the taxation of foreign profits of companies. The draft provisions in respect of the worldwide debt cap in particular have been significantly changed and are improved on the previous draft which contained many anomalies.

M&S Wins Again

In the long running saga of the battle to obtain group relief for losses sustained by its German and Belgian subsidiaries, M&S have been successful again.

An overview of the Proposed Senior Accounting Officers Obligations

Draft legislation in the recent 2009 Finance Bill sets out the details as to how the surprise new proposals relating to “Senior Accounting Officers” (“SAO”) of large companies will work. This note summarises the new obligations and suggests how businesses should respond to them.

National contacts

Avril Whitfield

Partner
+44 (0)20 7063 4292

Lindsay Pentelow

Lindsay Pentelow

Partner
+44 (0)1234 402 000

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