The View from No 50





March 2007

K P Bonney & Co

Chartered Accountants and

Chartered Tax Advisers

50 Cleasby Road  Menston

Ilkley  LS29 6JA

Tel:  01943 870933

Fax:  01943 870925







4th February 1987.  The day Keith Bonney got his practising certificate.


It started with an electronic typewriter, the world’s slowest photocopier (you remember the type with the lid that moved backwards and forwards as it made the copy), the living room table, a kettle and one client.


Back then all limited companies had to have an audit.  What a waste of resources that was.  Thankfully the government saw sense and dispensed with the need for audits for small companies.


Back then married women didn’t have a fiscal existence.  The husband was required to fill in a tax return for himself and his wife.  Independent taxation, the fiscal equivalent of votes for women, arrived in 1991, about one hundred years overdue.


Back then the taxable value of a two litre company car was £900.  How little did we realise what a perk that was!


On the subject of perks, back then you only paid income tax on benefits provided by your employer if you were either a director or a ‘higher paid employee’.  A higher paid employee was an employee who earned £8,500 or more per annum.  As the vast majority of employees did not earn this much they escaped tax on their perks.   Wind forward 20 years.  In today’s terms the equivalent of £8,500 is £28,800.  So how much do you think the threshold for paying tax on benefits is in 2007?  Answer £8,500.  This effectively means every employee who works full time is taxable on their employment perks.  It is politically difficult for the chancellor to increase taxes.  But he can secure tax rises without suffering a backlash by freezing exemptions and thresholds.  It is called fiscal drag.  What a drag.  The description ‘higher paid employee’ was dropped quietly somewhere along the way.


Back then the top rate of income tax was 60%. This rate applied to incomes above £41,200.  With today’s levels of mobility a return to these levels of taxation would see us all leaving the country.


The electronic typewriter was shuffled off into the back room in 1990 to be replaced with a Rolls Royce of a computer which ran an operating system called DOS.  It was cutting edge stuff by the standards of the day.


And what is the lot of a practitioner today?


It is a challenge.


This chancellor is responsible for one third of all tax legislation on the statute book in the UK today.  He has produced in ten years half as much legislation as was produced by all his predecessors.  Just like teachers, nurses, doctors and other professionals, tax practitioners are losing the battle to keep abreast of change.


This chancellor is not a willing listener.  He identifies his objective and he sets his course.  He rarely consults.  As a result of this stubbornness some dreadfully poor legislation has reached the statute book.  Witness the pre-owed assets tax.  So obscure and complicated is it that the unrepresented taxpayer would not know of its existence or relevance let alone how to calculate it.  Witness capital gains tax taper relief.  So badly was it designed that it has been under the knife for surgery in just about every Finance Bill since its introduction.  Witness the changes to trusts in 2006.  The chancellor made no attempt to understand the consequences of his decisions.  He based his reforms on the assumption that anybody who sets up a trust does so with the main objective of saving tax.  When middle Britain disabused him of this notion he was forced to back pedal - not something he is known for doing.   


Some of you have been on this journey with me for the full twenty years.  Others have joined me along the way.  I hope you feel you have been well served.  I intend to be here for a good while yet.  I hope you will stay and enjoy the rest of the journey with me.


The electronic typewriter is still here but it hasn’t had its keys pressed for many years.  If you know of anybody or any group willing to give it a good home please get in touch.





For the second time in a year HMRC has changed the advisory fuel rates.  The announcement was made on 30 January and the new rates apply from 1 February.


This change affects you if


·         your business is registered for VAT and


·         the business pays its employees a mileage rate for their business mileage  or


·         you charge the business a mileage rate for your own business mileage.


The new rates appear on the website.


What does HMRC think it is playing at?  Why couldn’t it make the change on 5 April?  Why did it give so little notice for the change?  Why can’t it be satisfied with making a change once a year?  Businesses do not need distractions like this like.   Poor show HMRC.

Our Advice: Make sure you use the new rates for journeys taking place from
1 February 2007.  View the new table of rates on the website.

Late News:  In response to criticism from its ‘customers’, HMRC has stated that it will allow those who cannot implement the changes by 1 February to do so with effect from 1 March instead.




The tax year ends on the Thursday before the Easter break.  Now is the time to make sure you have done your year end tax planning.


If you want tax relief for a pension contribution in 2006/07 you must pay your premium by 5 April.  Gone are the days when you could carry premiums back to the previous year.


If you have enough cash available, make sure you use your ISA entitlement for the year.


If you run a small business and you have a need to buy or replace plant and machinery or office equipment then think seriously about doing so before the end of the tax year (or 31 March if you trade through a limited company).   For expenditure incurred in 2006/07 you or your company is entitled to a tax deduction of 50% of the cost.  Unless the chancellor announces a change in his budget in March, the tax deduction falls to 40% in 2007/08.


If you have a capital gains tax liability which you would like to defer, have a look round for enterprise investment schemes.  The market tends to be active in the months before the end of the tax year.


If you have enough cash available and you are concerned inheritance tax will be payable on your estate when you die, make sure you have used your £3,000 annual exemption and consider giving away more.


And finally, there is one transaction you should consider putting off until after the end of the tax year.  If you own a non business asset which you have owned since 16 March 1998 and the asset will be chargeable to capital gains tax on disposal then on a sale after 5 April 2007 you will be eligible for capital gains tax taper relief of 40%.  That means 40% of your gain is exempt from tax.  On a sale before 6 April 2007 you will be entitled to taper relief of 35%.  So putting your sale off for a few days could save you a tidy sum in tax.  Taper relief for non business assets is capped at 40% so if you are hanging on for more, forget it.  On 6 April 2007 you reach maximum.




City boy, Trev, moved to the country and bought a donkey from an old farmer for £100.  The farmer agreed to deliver the donkey the next day.  The next day the farmer drove up to Trev’s place and said, “Sorry son, but the donkey died.”  “Never mind,” said Trev “Just give me my money back.”  “Can’t do that,” said the farmer “I’ve already spent it.”  “OK then,” said Trevgive me the donkey.”  “What are you going to do with him?” asked the farmer.  “I’m going to raffle him off,” answered Trev.  The farmer exclaimed “You can’t raffle off a dead donkey!”  “Sure I can.  Just watch me.  I just won’t tell anybody he’s dead,” replied Trev.


A month later the farmer bumped in to Trev and asked “What happened with the dead donkey?”  Trev said “I raffled him off.  I sold a thousand tickets at £1 each.”  “Didn’t anyone complain?” asked the farmer.  Trev replied “Just the guy who won.  So I gave him his money back.”


Trev went on to become the commercial director at Chelsea.





Copyright:  K P Bonney & Co LLP 2007.  All rights reserved.  No part of this publication may be produced, stored in a retrieval system, or transmitted in any form or by any means, electronic mechanical, photocopying, recording or otherwise without prior written permission of the publishers.  Disclaimer:  The publishers have taken all due care in the preparation of this publication.  No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the authors or the publisher.

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