PRESS RELEASE
December 2006
The Chancellor of the Exchequer, Gordon Brown delivered the Pre-Budget Report on Wednesday 6th December 2006 at 12.30 pm.
As far as JSA clients are concerned, the most significant announcement is Gordon Brown’s intention to introduce new rules to ensure that those working in “Managed Service Companies” pay tax and NIC at the same level as other “employees”. At first sight, these changes are unlikely to affect our “One Person” Personal Service Company clients, as the IR35 Intermediaries legislation will remain in place (at least, for the time being!). This means that if you own and operate your own limited company and use JSA for your bookkeeping, accounting and administrative needs, then nothing is likely to change after April 5th 2007.
However, the Government clearly intends to regulate what have come to be known as “Managed Service Companies”, encompassing both Composite (in JSA’s case, Chorus) and Umbrella companies (WorkWise, etc.). These proposals are explained in detail in the consultation document, “Tackling Managed Service Companies”, which is published alongside the 2006 Pre-Budget Report http://www.hm-treasury.gov.uk/media/53E/48/pbr06_managedservicecompanies_453.pdf
While, in principle, JSA welcomes any attempt to drive illegal and underhand practices from the industry, we do intend to take an active part in the forthcoming consultation process and represent your best interests to ensure that the proposed legislation is as fair and workable as possible.
We will review the consultation documentation in detail over the coming weeks and send you a full report once we have had sufficient time to fully assess all of its implications. In the meantime – THERE IS NO NEED TO TAKE ANY ACTION NOW. The new legislation will not come into effect until April 5th 2007 and in any event, will almost certainly be fine tuned as a result of the forthcoming consultation process. We will give all our Managed Service clients plenty of advanced notice exactly how the new legislation will affect them and what steps JSA will be
taking in order to comply with the new legislation long before 5th April.
And now, a summary of the rest:
Personal Tax
Rates/Allowances
- 2007/08 income tax allowances will increase in line with inflation (the personal allowance increases by £190 to £5,225). There are no changes to income tax rates. For national insurance (NI) purposes, earnings limits increased likewise, and there are no changes in NI rates. The income tax rates and bands for 2007/08 were not announced in the Pre-Budget Report. Details of these are normally made available in the main spring Budget.
Child Tax Credit
- The maximum is an annual amount for 2007/08 of £1,845 per child together with a family element of £545 per annum. The amount per child has been increased, but the family element has been frozen since the introduction of the credit.
Working Tax Credit
- The basic maximum benefit is increased for 2007/08 to £1,730.
Child benefit
- The government will introduce from April 2009 a new entitlement for all pregnant women to receive child benefit from the 29th week of their pregnancy.
Pensioners
- From April 2007: the basic state pension will rise to £87.30
- The Pensions Credit will be increased to £119.05 for single pensioners and £181.70 for couples
- The Savings Credit will be increased to a maximum of £19.05 for single pensioners and £25.26 for couples.
- The government is also introducing free off-peak local area bus travel, and committing to extend this to off-peak nationwide bus travel from April 2008 for those over 60 and the disabled.
Employers
- Increased national minimum wage enforcement.
Individual Savings Accounts (ISA)
- The overall annual investment limit will be at least £7,000.
- The mini/maxi distinction within the ISA will be removed.
- Child Trust Fund accounts will be able to rollover into ISA’s when they start to mature from 2020 onwards.
Self Assessment
- No changes to filing dates, other than those announced, and modified from Lord Carter's review last year.
- For SA this means that paper returns for 2007/08 will have to be filed by 31st October 2008 and on-line by 31st January 2009.
Corporation and other Business Taxes
No changes in tax rates.
Aligning filing dates
The Government has decided to:
- implement from 2008 to link the window for HMRC to open an enquiry into a company tax
return to the date when that return is submitted;
- the proposal to align the Companies Act filing deadline with the Corporation Tax filing deadline has been abandoned for the time being.
- HMRC are working towards a single online filing facility for companies by 2010.
Construction Industry Scheme (CIS)
- effective from 6 April 2007, the government has announced an increase in the standard deduction rate applied to subcontractors to 20% from the current 18%.
- A higher deduction rate of 30% is also introduced in the new scheme which allows unregistered subcontractors to start work.
Tax motivated incorporation
- government remains concerned about the tax motivated incorporation of the selfemployed, which involves businesses taking advantage of structural differences in the tax and NIC treatment that applies to companies. The government will therefore continue to review ‘how the system could be modernised, made simpler, more efficient and more competitive’.
Tax relief for business cars
In March 2006 HMRC and HM Treasury issued jointly a discussion document about business expenditure on cars.
The proposals are:
- A new car pool would be introduced in which all cars would be pooled.
- A range of first year allowances depending on a car’s CO2 emissions would be introduced.
- The annual tax write off for other cars (the ‘writing down allowance’) would be set below the 25% rate available for other business assets.
- As a consequence there would no longer need to be a specific distinction between cars costing more or less than £12,000.
The government will continue discussions with business and present more detailed proposals at Budget 2007.
Environmental Measures
Air Passenger Duty (APD) - APD rates will be increased from 1 February 2007.
Road fuel - from 7 December 2006, the effective excise duty rates for road fuels will be increased by 1.25 pence per litre.
Other Matters
Online Filing
Legislation will be brought forward during 2007 to implement the changes which will start in 2008.
The key proposals are to:
- Require businesses to file their VAT returns, company tax returns and PAYE in-year forms online in phases from April 2008.
- Introduce new filing deadlines for income tax self-assessment returns of 31 October for paper forms from 2008, but retain 31 January for online returns.
- Promote online filing by tax agents and better quality data by withdrawing computer generated paper ‘substitute’ self assessment returns from 2007/08.
-ENDS-
For further information contact Barry Roback, Chief Executive of JSA on 01923 257202 or roback@jsagroup.co.uk or Robin Liston, press relations adviser to JSA on 0208 883 7314/ 07740 829171 or robinliston@pobox.com
JSA SERVICES LTD
JSA HOUSE
110 THE PARADE
WATFORD
WD17 1GB
Tel: 01923 257200