Insights

Another Christmas is almost upon us, and this year has once again vanished too quickly.  Perhaps that’s because we’ve all never been busier.  ‘Busyness’ is becoming the new norm as the recession tentatively starts to improve.  Good news for everyone, but it has resulted in people needing to take on additional responsibilities because budgets have been cut. As a result ‘Doing It Yourself’ has been a big trend this year for business owners.

There is certainly a lot more change afoot in the world of tax for 2011 and much of it started in June.  The new Government has been busy introducing some new initiatives that we hope will support further business growth, such as the increase in Entrepreneurs’ Relief to £5m of lifetime gains.

We also saw an increase in the take up of EIS and VCT investments as people sought ways to avoid paying income tax at the new 50% rate.

Other measures from the Treasury are not so favourable for higher rate taxpayers, such as the change to employee benefit trusts (EBTs).  This legislation was confirmed early in December and looks to have been timed to coincide with the start of the City bonus season.  EBTs typically worked because the recipient took their bonus as a loan, which was then free from income tax or NICs. This is now no longer the case as any such payments are automatically to be treated as income liable to PAYE.  This change will also have an impact upon EFRBS (employer financed retirement benefit schemes), making such initiatives much less attractive.

With EBTs and EFRBSs no longer so attractive, we may see renewed interest in pension contributions – although now restricted, and in EMI schemes to reward performance in a tax effective way. HMRC supports these schemes and you can find out more about how they work here.

Finally, in these times of high income tax rates, clients are always looking for ways to generate capital growth - for second property owners it may also be possible to benefit from the furnished holiday lettings rules.  These were officially amended during the year and although more prescriptive, still present a good opportunity to invest in property for long-term growth in a tax efficient way.

That’s all from us at TaxTalk, we will be back blogging in January with the latest tax issues and business advice.

Look out for our blog on selling your business if that’s a possibility for the New Year.

On behalf of everyone in the team, at we would like to wish you all a very happy Christmas, and an extremely busy New Year 2011!

Best wishes from us all at TaxTalk RJP.