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Busy Practitioner by Mark McLaughlin ATII TEP

This article outlines some key deadlines and practice points for accountants and tax practitioners.

Self Assessment

Taxpayers (or their agents) who informed the Inland Revenue of the requirement to file a Self Assessment return for 2001/02 towards the statutory notification deadline of 5 October 2002 may well receive a return issued on or after 1 November 2002. In this case, the filing deadline is extended to three months from the issue date, as opposed to 31 January 2003 which applies to the vast majority of clients. The due date for the balancing payment of tax is the same as the filing date for these purposes (TMA 1970, ss 8, 59B).

Practice Points

April 2003 may still sound reassuringly distant for those practitioners already contemplating the next round of self-assessment returns. However, that month is potentially significant for other reasons as well, so be prepared.

• For example, for expenditure incurred from 1 April 2003, small businesses will no longer be able to claim 100% first year capital allowances on information and communications technology (CAA 2001, s 39). Clients contemplating the purchase of new computers or other qualifying equipment should therefore be advised to do so sooner rather than later.

A planning point on the subject of capital allowances for businesses is that 100% first year allowances are available for capital expenditure on cars with low carbon dioxide emissions (i.e. up to a maximum of 120g/km), or on electronically propelled cars (CAA 2001, s 45D). This relief is also available for a limited period only, as it applies to new cars registered from 17 April 2002 for a six year period until 31 March 2008.

In addition, the capital allowances restriction for cars costing more than £12,000 does not apply to cars qualifying for the 100% allowances. There is similarly no restriction in the deduction from taxable profits for businesses hiring or leasing such cars, where the retail price when new exceeds £12,000 (TA 1988, s 578A). However, the potential restriction for private use by proprietors of unincorporated business still applies.

• From 6 April 2003, employees with company cars who receive fuel for private motoring are faced with a benefit in kind charge based on carbon dioxide emissions. The same emissions-based percentage used in the car benefit calculation will be applied to a statutory figure of £14,400, for the purposes of determining car fuel benefit (TA 1988, s 158). Clients should be made aware of the potential effect of these changes.

• For certain capital gains tax purposes, including holdover relief for gifts of business assets, the definition of a ‘trading company’ changes from 6 April 2003 (FA 1998, s 140D). Presently, a company’s business must ‘wholly or mainly’ exist to carry on a trade, in order to satisfy the definition. However, this is being replaced by the more restrictive definition of ‘trading company’ that applies for taper relief purposes, whereby any non-trading activities must not be ‘substantial’ (TCGA 1992, Sch A1 para 22). It may therefore be an opportune time to review the status of client companies.

It should also be remembered that there are potential increases in National Insurance contributions for employees, employers and the self-employed from 6 April 2003. Planning in this area on behalf of clients between now and next April is therefore likely to be time well spent.