Welcome to the May 2009 Newsletter from Connolly Accountants Ltd

The Government has announced that it will ban employers from using tips to bring workers' wages up to National Minimum Wage levels, with effect from October. The measures follow a consultation on the use of tips, gratuities and other charges to pay the minimum wage. The news was shortly followed by a confirmation that the minimum wage rate will also rise from 1 October, despite recent calls from business groups for a rate freeze.

Meanwhile, the recent Budget introduced significant changes to the rules on Furnished Holiday Lettings (FHL). The Government has extended the rules to cover furnished holiday accommodation not only in the UK, but also elsewhere in the European Economic Area (EEA). The extension will be short-lived, however, as the FHL rules are to be repealed from 2010/11. In the meantime there is an opportunity for those who have qualifying FHL properties within the EEA to claim for at least one of the relevant reliefs or other treatments to apply. For more information, please see our article below.


Employers banned from using tips to supplement staff wages

The Government is to ban employers in the hospitality industry from using tips and service charges to bring workers' wages up to national minimum levels, with effect from October. The measures follow a consultation on the use of tips, gratuities, service charges and cover charges to pay the minimum wage.

The Government is also calling for greater transparency and clarity for customers in bars and restaurants, by means of a new code of practice.

Employment Relations Minister Pat McFadden said, 'When people leave a tip for staff, in a restaurant or anywhere else, they have a right to know that it will not be used to make up the minimum wage'.

Meanwhile, the National Minimum Wage is to rise from 1 October 2009, with the main adult rate increasing by 7p to £5.80 an hour. The statutory rate for 18 to 21-year-olds will rise to £4.83, while 16 and 17-year-olds will receive a minimum of £3.57.

The normal February deadline for the announcement was extended to May, in order to allow the Low Pay Commission time to consider further economic data before making its recommendations.

Business groups gave a muted reaction to the news, with both the Confederation of British Industry and the British Chambers of Commerce acknowledging that the increase was at least a 'modest' one.

For more information on the National Minimum Wage, please contact us.

The rise and fall of Furnished Holiday Lettings

The 2009 Budget introduced significant changes to the rules on Furnished Holiday Lettings.

Currently, income received from furnished holiday accommodation in the UK may be treated differently for tax purposes from other rental income. Providing they meet certain criteria, landlords can benefit from tax advantages if they make a loss on their earnings from the property or decide to sell the property.

Since their inception, the Furnished Holiday Lettings rules have applied to furnished holiday accommodation situated in the UK only. The Government accepts that this may not be compliant with European law, and has therefore extended the rules to cover furnished holiday accommodation elsewhere in the European Economic Area (EEA). However, this extension will be short-lived as the FHL rules are to be repealed from 2010/11!

In the meantime there is an opportunity for those who have, or have had, qualifying FHL properties within the EEA (but outside the UK) to claim for at least one of the relevant reliefs or other treatments to apply. These include treatment of the FHL business as a trade for the following purposes:

  • loss relief
  • capital allowances
  • Landlords Energy Saving Allowance (LESA)
  • certain capital gains reliefs (such as taper relief, business asset roll-over relief, entrepreneurs’ relief, relief for gifts of business assets)
  • relevant earnings when calculating the maximum relief due for an individual’s pension contributions.
For further information on the new rules and the time limits for claiming, please contact us.

ESSENTIAL TAX DATES AND DEADLINES

Click here for key tax deadlines for the coming month.


QUOTE OF THE MONTH

'This is a basic issue of fairness. We do not believe employers should be able to use tips meant as a bonus for staff to boost pay levels to the legal minimum.'
Pat McFadden, Employment Relations Minister, commenting on Government plans to ban the use of staff tips and gratuities to help pay the minimum wage.


WEBSITE OF THE MONTH

http://www.businesslink.gov.uk/realhelp
Includes information on the package of Government support available to small businesses and individuals.


ON OUR WEBSITE

Essential business advice
For advice and information on all aspects of running a business, visit the 'Your Business' section of our website.

The latest tax rates
View the 2009/10 tax rates and allowances here.

Car scrappage scheme gets underway
A new car scrappage scheme, announced in the 2009 Budget, has now come into effect.
Click here for the full story

Large firms urged to sign up to Prompt Payment Code
The Forum of Private Business has renewed its efforts to encourage the UK's biggest firms to sign up to the Government's Prompt Payment Code.
Click here for the full story

Businesses offered interest free loans to go green
The Carbon Trust has begun offering over £100 million in interest free loans to help businesses become more energy-efficient.
Click here for the full story

Government launches trade credit insurance scheme
Businesses that have experienced a reduction in their credit insurance cover are now able to purchase up to six months of top-up cover.
Click here for the full story

UK retains working time opt-out
The UK has retained the right to 'opt out' of the EU Working Time Directive, following the collapse of discussions in Brussels.
Click here for the full story