Business News - January 2008

Business Owners Warned Over New Tax Changes

Business owners are facing a host of tax changes that could have major implications for their firms, High Wycombe-based accountants the Fish Partnership have warned.

The alert follows government announcements on tax arrangements due to come into effect in April 2008, including draft legislation to stamp out income shifting. This has allowed husband-and-wife and other owner-managed businesses to reduce their tax bills by “shifting” income from the person bringing in most money to a spouse or partner.

The government has also clarified its reforms to capital allowances, which businesses use to offset expenditure on buildings, plant and machinery against their tax bills. These include cutting the rate of tax relief for all plant and machinery from 25 per cent to 20 per cent and the creation of a new integral features pool – for items including heating and electrical systems, which would previously have been regarded as plant and machinery – with a tax relief rate of just 10 per cent.

But businesses are still waiting for a final government decision on capital gains tax (CGT) taper relief. Currently, if someone owns shares or a business for more than two years, they pay CGT at 10p in the pound on any profit above a £9,200 tax-free allowance, instead of at 40 per cent.

But Chancellor Alistair Darling announced in his pre-Budget report last October that he planned to replace taper relief with flat rate of 18 per cent. Following furious protests from the business sector there were hopes of a U-turn, but Mr Darling has delayed unveiling his final plans, due in December, for further consultation.

Martin Sheehy, partner at the Fish Partnership, said: “Businesses of all sizes will need to keep their financial wits about them to cope with this barrage of changes. Tax planning always makes sound business sense and this is an ideal time for businesses to review their financial arrangements with a qualified professional, such as an accountant, to ensure that they make the most of all the opportunities available within the current and future tax regimes.”

For more information, contact the Fish Partnership on (01628) 527956

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