Welcome to the August 2010 Newsletter from Connolly Accountants Ltd

Business groups have this month expressed concerns over Government proposals to scrap the default retirement age from 1 October 2011. While ministers hope the move will encourage more people to work longer, the Confederation of British Industry (CBI) has warned that it could create uncertainty for employers and greater legal complexity.

Meanwhile, some of the tax breaks available to second home owners could soon be withdrawn under new plans to reform the rules on furnished holiday lettings (FHLs). Experts predict that some 65,000 people could lose out as a result of the reforms which, if approved, are expected to come into force next April.

Default retirement age to be scrapped by October 2011

The default retirement age (DRA) will be abolished from 1 October 2011, the Government has announced.

It follows confirmation in the Emergency Budget that the Coalition would speed up the withdrawal of the DRA.

The proposals, which are now the subject of a consultation, allow for a six month transition from the existing regulations. It means that the changes could begin to take effect from next April.

Currently, an employer can force a member of staff to retire at the default age of 65, irrespective of their circumstances. Although staff can request to work beyond the DRA, it is entirely at the company’s discretion.

Rachel Krys, Campaign Director at the Employers Forum on Age, described the move as ‘an incredible leap forward,’ adding that employers have ‘nothing to fear’ from the proposals.

However, the Confederation of British Industry (CBI) has expressed concerns over the speed of the changes.

‘Scrapping the DRA will leave a vacuum, and raise a large number of complex legal and employment questions, which the Government has not yet addressed,’ said the CBI's Deputy Director-General, John Cridland.

‘This will create uncertainty among employers and staff, who do not know where they stand. For employers, these proposals could make workforce planning and providing some employment benefits, such as critical illness cover, next to impossible’.

Meanwhile, the Forum of Private Business (FPB) has warned that the move ‘will cripple some small businesses by removing the tools that help them to plan for the future’.

Latest statistics show that in the last three months an extra 40,000 people over the age of 65 have joined the UK workforce, taking the total number to a record high of 823,000.

While many pensioners actively choose to work beyond this age, significant numbers have been forced to work because they are unable to rely on the state pension or their personal finances. Others are doing so to help support their children or grandchildren, experts have claimed.

We can help you plan for a comfortable retirement – please contact us for more information.

Government to scale back tax breaks for furnished holiday lettings

Some 65,000 second home owners could lose out under Government plans to reduce the tax benefits available for furnished holiday lettings (FHLs).

In a new Consultation document the Coalition Government proposes a number of changes that reduce the benefits of the existing FHLs treatment. These include:

  • increasing the minimum period for which the property must be available for commercial letting as furnished holiday accommodation during the tax year from 140 to 210 days;
  • increasing the minimum period for which the property must actually be let as furnished holiday accommodation during the tax year from 70 to 105 days; and
  • restricting the use of losses from a furnished holiday lettings business.

The changes will apply to FHLs in both the UK and the European Economic Area (EEA).

The aim is to bring the rules in line with EU law and put the focus on commercial businesses rather than those run for personal use.

Under the existing rules, FHLs that meet certain qualifying conditions are treated as a trade for certain purposes, which enables them to benefit from more generous loss relief than other types of lettings.

Landlords may also be able to claim capital allowances on furnishings, furniture and fixtures and enjoy capital gains tax reliefs (such as rollover relief and Entrepreneurs’ Relief) that are available to traders.

In the Emergency Budget in June, the Chancellor confirmed that the previous Government’s plans to withdraw the FHL rules from 6 April 2010 would not take effect.

The Consultation will run until 22 October 2010. The Government will then publish its response by the end of the year and the measures, which are expected to take effect from April 2011, will be legislated for in the Finance Act 2011.

For more information and advice on tax and property, please contact us. We will be delighted to assist you.

ESSENTIAL TAX DATES AND DEADLINES

31 August: Annual adjustment for VAT partial exemption calculations (May VAT year end).

30 September: End of CT61 quarterly period.

For more information on key tax dates and deadlines, visit our 2010/11 Tax Calendar.

QUOTE OF THE MONTH

'The concept of introducing regulations only as they are needed is absolutely necessary given the existing burden on small businesses, but it will require a change in behaviour for many government departments'.

The FPB’s Jane Bennett welcomes the Government’s ‘one-in, one-out’ approach to regulation

WEBSITE OF THE MONTH

http://www.retirementreform.org.uk

Website of the Centre for Retirement Reform, a think tank which has been set up to facilitate reform of the UK pensions system.

ON OUR WEBSITE

2010/11 tax and financial strategies
For a comprehensive guide to all aspects of tax and financial planning, visit the tax strategies section of our website.

Changes to capital gains tax
Or why not visit the hot topics area of our site, for information and advice on the recent changes to capital gains tax?

Small business confidence is "on the turn"
Business confidence is at its highest level since 2007, according to a new report.
Click here for the full story

EU Directive to give self-employed workers new benefits
Self-employed workers and their partners are to receive the right to maternity leave and pension benefits following the introduction of a new European Directive earlier this month.
Click here for the full story

Business welcomes 'one-in, one-out' approach to regulation
Plans to introduce a 'one-in, one-out' regulatory system to help tackle the 'red tape burden' are being welcomed by some of the UK’s leading business groups.
Click here for the full story

Supermarket adjudicator to investigate disputes
A new adjudicator is to be set up to resolve disputes between farmers, suppliers and supermarkets, the Government has announced.
Click here for the full story

FSB calls for overhaul of maternity leave
A leading business group is calling on the Government to reform statutory maternity and paternity leave to make it easier for small firms to administer the ‘complex’ employment entitlement.
Click here for the full story