Chartered Accountants of Poynton, Cheshire

There have been considerable changes to the pension contribution rules over the last couple of years.

In summary, these are as follows:

• Any individual can make payments of £3600 per annum gross of tax, whether they have an income or not.

• If an employer makes a contribution on behalf of an employee, this will be tax deductible in that employer's accounts as long as the payment is made 'wholly and exclusively1 for the purposes of the trade.

• The maximum any individual can pay in any pension payment period (which is usually the same as the tax year) is normally £21,5000 and any contributions over this will be subject to income tax of 40%. There are some exceptions to this rule.

• There is no longer a provision which allows excessive personal pension contributions to be carried back to the prior year. Some special rules remain in place for retirement annuity contributions.

From 1 October 2007 this is set at £5.52 per hour for workers aged 22 or  older.  The reduced development rate for employees aged between 18 and 21 is £4.60 per hour.  The rate for workers who are under 18 and no longer of compulsory school age is set at £3.40 per hour.

It is vital that, as an employer, you show full and correct National Insurance numbers on all documents on which you record contributions, particularly when the forms are submitted to HMRC as part of PAYE compliance.

If an employee does not know their National Insurance number, you can trace it through HMRC by filling in HMRC leaflet CA6855.

If you have doubts over the accuracy of the National Insurance numbers that you hold, HMRC can check and update them for you.

The full procedure is set out in HMRC leaflet CA89.

There have been considerable changes to the pension contribution rules over the last couple of years.

In summary, these are as follows:

• Any individual can make payments of £3600 per annum gross of tax, whether they have an income or not.

• If an employer makes a contribution on behalf of an employee, this will be tax deductible in that employer's accounts as long as the payment is made 'wholly and exclusively1 for the purposes of the trade.

• The maximum any individual can pay in any pension payment period (which is usually the same as the tax year) is normally £21,5000 and any contributions over this will be subject to income tax of 40%. There are some exceptions to this rule.

• There is no longer a provision which allows excessive personal pension contributions to be carried back to the prior year. Some special rules remain in place for retirement annuity contributions.

From 1 October 2007 this is set at £5.52 per hour for workers aged 22 or  older.  The reduced development rate for employees aged between 18 and 21 is £4.60 per hour.  The rate for workers who are under 18 and no longer of compulsory school age is set at £3.40 per hour.

It is vital that, as an employer, you show full and correct National Insurance numbers on all documents on which you record contributions, particularly when the forms are submitted to HMRC as part of PAYE compliance.

If an employee does not know their National Insurance number, you can trace it through HMRC by filling in HMRC leaflet CA6855.

If you have doubts over the accuracy of the National Insurance numbers that you hold, HMRC can check and update them for you.

The full procedure is set out in HMRC leaflet CA89.

There have been changes to the identification procedures (ID) that accountants have to legally carry out on their clients.

Until December 2007 this was only required for new clients taken on after 2004. In December this changed, so now we may need to carry out a formal ID check on all our clients.

While this is unlikely for long-established clients, we might have to carry out an additional ID check on some clients for whom we do not have sufficient ID details on our files, to satisfy the regulatory requirements.

When one of your employees leaves, you need to give them a form P45 and send a copy to HMRC.

You can file P45s online, and this will be compulsory for small employers by April 2011.

Employers with 50 or more employees must file online by April 2009.

The form is straightforward to fill in but even simple errors could mean your form is rejected.

These errors include incorrect or missing National Insurance numbers, pay details or tax codes.

There has been a big change to the taxable benefit due on vans.

Where an employer provides a van for an employee, which they can use for private journeys, the taxable benefit from 6 April 2007 becomes £3000 per annum.

This taxable benefit is not levied if the private use is merely incidental.

HMRC have given some guidance on what is incidental but this is not exhaustive so we will be pleased to advise on the situation if you are providing vans that can also be used for private journeys.

Every year, employers are required to send details of the salaries, tax and National Insurance deducted from their employees.

These year-end returns have to be submitted by 19 May 2007 to avoid a fine. These documents can be submitted on-line via the internet.

Appletons can assist you in this process.

 If you are a small business - defined by HMRC as having fewer than 50 employees - and you file your P35 online, HMRC will pay you £100 tax-free for doing so. You usually claim this back by reducing your next monthly PAYE payment.

When you buy new equipment for your business, ask whether it is energy or water efficient.

Check the list on www.eca.gov.uk to see if you could get a 100% deduction fo the cost in the year of purchase.

There have been considerable changes to the pension contribution rules over the last couple of years.

In summary, these are as follows:

• Any individual can make payments of £3600 per annum gross of tax, whether they have an income or not.

• If an employer makes a contribution on behalf of an employee, this will be tax deductible in that employer's accounts as long as the payment is made 'wholly and exclusively1 for the purposes of the trade.

• The maximum any individual can pay in any pension payment period (which is usually the same as the tax year) is normally £21,5000 and any contributions over this will be subject to income tax of 40%. There are some exceptions to this rule.

• There is no longer a provision which allows excessive personal pension contributions to be carried back to the prior year. Some special rules remain in place for retirement annuity contributions.

There are many ways to save tax - all of them perfectly legal.

For example, if you realise Capital Gains after the end of the tax year, and delay payment of the tax for 12 months and split sales across the end of the tax year – you can make use of two years’ annual exemption.

Also, make an outright gift to your spouse, who can make use of his or her exemption, too. Delaying a sale can also mean more taper relief – so less tax.

Save employers’ NIC

Employee costs may be high, but save employers’ national insurance contributions by rewarding employees through all employee share schemes and pension contributions instead of additional salary or bonuses.

Ensure business borrowings attract tax relief

Funds borrowed for business purposes obtain full tax relief; your mortgage does not!

Appletons can help you to identify ways to make the most of tax-saving opportunities and investments.

We are always pleased to discuss matters with you – contact us today for further information.

There are many ways to save tax - all of them perfectly legal.

For example, if you are over 65, keep your income below the £18,900 limit  - at that limit the higher allowances are scaled back.

Call us at Appletons Accountants and we'll tell you more!

There are many ways to save tax - all of them perfectly legal.

Did you know that....

Tax can be effectively deferred by investment in Enterprise Investment Scheme shares, Venture Capital Trust shares (both subject to limits), or in film finance partnerships?

Call us at Appletons Accountants and we'll tell you more!