Welcome to the January 2008 Newsletter from Connolly Accountants Ltd

After months of speculation and a chorus of disapproval, Alistair Darling has delivered his controversial statement on the proposed reforms to capital gains tax. The Chancellor confirmed that he will proceed with plans to introduce a flat rate of 18% and abolish taper relief, but told MPs that he would also be developing a new tax concession to assist entrepreneurs.

Meanwhile, business leaders have called on the Government to abandon its plans to increase fuel duty tax. Earlier this month more than 700 businesses submitted a letter campaigning for the Treasury to axe April’s 2p rise, amid fears that smaller firms may be 'driven out of business' as a result of the ascending cost of fuel.


Darling confirms capital gains tax reforms

Alistair Darling has told MPs that he will make a tax concession worth £200m as part of his strategy to reform capital gains tax (CGT).

Earlier this month, the Chancellor confirmed that plans to axe taper relief and impose a flat rate of 18% will be implemented later this year, but announced his intention to develop a new ‘entrepreneurs’ relief’ – a concession the Government hopes will mollify critics from within the business community.

Under the revised rules a reduced 10% rate will apply up to the first £1m of lifetime capital gains made by entrepreneurs and business investors. This ‘entrepreneurs’ relief’ will apply when small business owners sell their firms, and will be available to all employees and company directors who invest a ‘material stake’ in a qualifying company from 6 April 2008.

There was protest from the business sector after Darling proposed to abolish taper relief and impose a single rate of 18% in his Pre-Budget Report last October, with many fearing that the flat rate would ‘ruin’ small firms and ‘damage’ Britain’s enterprise culture. Since this date, the Chancellor has been locked in a series of intense talks with business leaders to discuss their concerns over the forthcoming changes to the tax regime.

The latest proposals have received mixed reactions from the entrepreneurial community. The Federation of Small Businesses (FSB), which had campaigned for a 9% rate on the first £750,000 of capital gains, welcomed the Chancellor’s tax concession for small firms.

The new relief ‘will go some way to protecting entrepreneurship in the UK as well as benefiting small business owners planning to pay for their retirement with the sale of their businesses,’ said John Wright, FSB national chairman.

However, the director general of the Confederation of British Industry, Richard Lambert, has warned that the ‘£700m tax hike’ will have a ‘damaging effect on job creation, investment and savings at exactly the wrong time in the economic cycle.’

Meanwhile, Shadow Chancellor George Osborne claimed Darling’s controversial tax plans had attracted ‘the universal opposition of British business’ and provided a ‘textbook example of how not to write tax law’.

Please note that the changes are still only proposals at this stage. However, if you would like to discuss the implications they may have for your business, please contact us.


Businesses unite in protest over scheduled rise in fuel tax

The Government has come under pressure to abandon its plans to increase fuel tax after receiving a letter of protest signed by more than 700 businesses from across the UK.

Fuel duty is scheduled to rise by 2p per litre from April this year; an increase that experts say will cost the haulage industry around £170 million. Those in the transport sector claim they are now struggling to compete with their European rivals as a result of the rising cost of fuel in Britain.

The letter, addressed to Chancellor Alistair Darling, argues that smaller hauliers are ‘likely to be the worst hit as they will find it difficult to pass on the extra cost to customers.’

‘The logistics industry is critical to the UK economy yet the tax system is making British hauliers uncompetitive,’ the letter said. ‘As an immediate measure we urge you to scrap the 2p increase scheduled for this April.’

Earlier this month the Federation of Small Businesses also warned that smaller enterprises could ‘bear the brunt’ of escalating fuel costs, whilst the British Chambers of Commerce has dismissed April’s proposed increase as ‘completely unwarranted.’

Despite mounting pressure from the business community, the Treasury has shown no signs of retreating on its decision to impose the controversial tax rise. The proposed increase will send ‘the right environmental signals in [the] fight against climate change, while continuing to fund vital public services,’ according to a spokesperson for the Treasury.

Darling is expected to meet with the Road Haulage Association in early February to discuss the forthcoming increase.

If you would like to discuss any aspect of motoring costs for your business, please contact us.


ESSENTIAL TAX DATES AND DEADLINES

Click here for key tax deadlines for the coming month.


QUOTE OF THE MONTH

'With increasing longevity, if we don’t tackle the challenge of under-saving, by around 2050 we face the nightmare of a pensions crisis with people of working age struggling to pay for an ageing population.'
(Former) Secretary of State for Work and Pensions, Peter Hain, on the importance of investing in a pension fund.


WEBSITE OF THE MONTH

www.energywatch.org.uk
Official site of the independent gas and electricity watchdog, which provides free and impartial advice for energy consumers.


ON OUR WEBSITE

Tax advice at the touch of a button
For information and advice on business and personal taxation issues, please visit our tax strategies page

A host of useful interactive tools
To take advantage of our handy resources, which include financial calculators and downloadable forms, visit our interactive tools.

Online shopping makes up '15 pence in every pound'
Internet shopping in 2007 increased by over 50% and accounted for 15p in every pound spent, a recent report has revealed.
Click here for the full story

Equal Pay Act in need of 'urgent reform'
Britain’s Equal Pay Act has ‘reached its sell-by date’ and should be replaced with more ‘modern legislation,’ the Equality and Human Rights Commission has warned.
Click here for the full story

Government unveils plans to increase HMRC powers
HM Revenue and Customs has outlined new measures that will increase its powers and clarify the rights and responsibilities of taxpayers.
Click here for the full story

Take responsibility for your pension fund, advises Government
The Government is urging individuals to take ‘personal responsibility’ for their future savings in order to avoid a pension deficit later in life.
Click here for the full story

Small firms urged to evaluate energy bills
The Forum of Private Business is encouraging small firms to consider switching to an alternative gas and electric supplier following a rise in energy prices.
Click here for the full story