The Fizz! Blog

National Minimum Wage increases

From 1 October 2009 the national minimum wage will increase:

• £5.80 an hour to workers aged 22 and above
• £4.83 an hour to workers aged 18-21
• £3.57 an hour to workers aged below 18 who are no longer of compulsory school age

As ever,  employers should make sure they adhere to these new rates.

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Divorce as a tax-planning tool?

Here's a brief summary of a tax case from the summer that made me laugh.

Mr Rockliff was a retired policeman.  He received a pension from his former employer.  His wife had no income, and consequently had a 0% tax band going to waste.  He decided that he would just declare half of his pension on his own tax return, and have his wife declare the other half.  That way, less tax would be payable on the income overall.

Not surprisingly, Her Majesty's Revenue and Customs didn't agree with this creative approach to taxation.  It's been a central principle of UK tax for quite a while now that an individual's income is his or her own, and can't just be allocated to a spouse.  Despite this major flaw in his plans, Mr Rockliff decided to take the issue to a tax tribunal.

Showing a further capacity for imagination that, if we're honest, is not generally associated with the police force, Mr Rockliff's argument to the tribunal was that if a) he were he to be divorced from his wife, and b) a court were consequently to order his pension to be split between him and his ex-wife, then some of the pension would be taxable on him and some taxable on his wife.

Unfortunately, the tribunal pointed out that a) he wasn't divorced from his wife and b) a pension sharing order therefore hadn't been made.  So, he lost.  Why Mr Rockliff had pursued the matter I don't know, because there was never any chance he would win.

Of course, if Mr R shows a bit more commitment, he might want to consider actually getting divorced, and have a pension sharing order made, thereby achieving his goal.   However, the danger is that might be a bit of a short-term saving at the expense of long-term cost - the reliefs available against Capital Gains Tax and Inheritance Tax are much more generous to married couples than other co-habitors.  And of course divorce isn't cheap in itself.  So it's probably not a tax-planning strategy that is going to be advisable for many couples.

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Some redundancy payments to increase

The weekly limit used in the calculation of statutory redundancy pay increases from £350 to £380 on 1st October. For employees earning less than £350 a week, redundancy pay won't change, but for those earning more than that threshold it will.

Business Link has another of their very helpful tools here, designed to help you follow the correct procedures when an employee must be dismissed or made redundant.

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NDO - "New Disclosure Opportunity"

A couple of years ago, HM Revenue & Customs had a sort of semi-amnesty for people who had failed to declare income from offshore bank accounts or assets.  A lot of people are under the misapprehension that interest on offshore bank accounts isn't taxable.  That's wrong.  It's basically no different from UK bank interest for most people.

That semi-amnesty was quite successful, so now HMRC are having a second go.  Called the New Disclosure Opportunity, and running for three months from 1 September, it enables taxpayers to declare previously undeclared foreign income.  There will still be a penalty to pay (hence my calling it a semi-amnesty), but it will be significantly lower than usual - just 10% of the tax due - or 20% if you spurned the opportunity to come clean last time.

Historically, people have generally got away with not declaring offshore income.  However, financial institutions are increasingly being forced to share their records with tax authorities so that evaders can be identified.  Which is, by and large, a good thing.  Anyone not declaring such income would probably be well advised to tell the taxman now rather than having the bank snitch on them after the NDO window closes.

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Clampdown on R&D incentives on the way?

It's being suggested that the Revenue may start looking harder at claims for Research and Development Tax Credit, to try and restrict the amount they pay out.  Historically, despite one or two high profile cases where companies have plainly tried it on and claimed when they're not entitled, the Revenue have always been reasonably happy to dish out R&D credits without too much scrutiny. I suspect that means that a lot of suspect claims are paid out without question, so I'm not surprised if it's an area they've decided they should look at more closely.

Of course, if you're entitled to the credit then a more vigorous claim inspection shouldn't deter you - but if you're relying on a cash repayment, it might be sensible to budget for receiving it a month or two later than you'd normally anticipate it.

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