The View from No 50





November 2005

K P Bonney & Co

Chartered Accountants and

Chartered Tax Advisers

50 Cleasby Road  Menston

Ilkley  LS29 6JA

Tel:  01943 870933

Fax:  01943 870925






With effect from 6 April 2006 the complicated old pension regime is being swept away and replaced with a radical new, simpler system.


Perhaps words like simple, simplified and simplification should be used with care.  Remember VAT was described as a simple tax when it was introduced.  In its early days the self assessment tax system was referred to as simplified assessing.  The businesses and individuals who are users of these systems would quickly disabuse you of any notion that they (the systems) are simple.


Pension simplification has already received extensive media coverage.  Hardly a day goes by without some journalist reminding us that, through our personal pension schemes, we shall soon be able to invest in holiday homes, residential properties, yachts, fine wines, racehorses and other exotica.


At the moment there are limits to the amount you can contribute to and receive from a pension scheme.  Under the new regime there will be similar restrictions and it is worth reviewing these briefly.


Lifetime allowance


There will be a single lifetime allowance (LTA) against which an individual’s pension savings will be tested when they take their benefits.  At the outset the LTA will be set at £1.5m.  This means that if you retire and take all of your pension benefits in 2006/07 then so long as your pension fund is worth no more than £1.5m you can do so without any surprise tax charges.


If your fund exceeds £1.5m in value, the excess will be subjected to a one off tax charge of 25% to the extent that the excess is taken as a pension and 55% to the extent the excess is taken as a lump sum.


The LTA will be increased at the beginning of each new tax year.  The LTA’s for all years to 2010/11 have already been published.


To the extent your pension savings reside in personal pension schemes it is easy to value them.  But how do you value an occupational pension (one based on final salary) for this purpose? The answer is to multiply each £1 pa of anticipated pension by 20.  That is the value of your pension scheme.


If you are fortunate enough to have a pension fund worth more than £1.5m you need to be considering now whether you should be doing something to avoid the 25% and 55% charges referred to earlier.  In these circumstances there are two planning alternatives – primary protection and enhanced protection.


Annual allowance


In future there will be no limit to the amount you can contribute to your pension scheme each year.  There will however, be a limit to the amount of contributions qualifying for tax relief.  If you have earnings above £215,000 you will be able to claim tax relief on contributions of up to £215,000.  If you have earnings below £215,000 you will be able to claim tax relief on an amount equal to your earnings.  If you have no earnings or if your earnings do not exceed £3,600, you will be able to claim tax relief on contributions of up to £3,600.


Our Advice:  Even at this relatively late stage the government is still finishing the rules, which just goes to prove pensions are anything but simple.


If you are one of the people fortunate enough to have sufficient pension savings to be affected by the LTA you need to take action now.  Speak to us or your financial adviser for further advice.





Tax returns have to be filed with the Revenue by 31 January following the end of the tax year.  The Revenue then has one year until the following 31 January to make any enquiries.  After that date the enquiry window closes.


Some people withhold their tax returns until the filing date even though they might have completed their returns months before.  The reason they delay submission is to reduce to a minimum the period of time (12 months) the Revenue can scrutinise their returns.


We have one or two clients who ask us to hold back their returns for this reason.


The question is, are you any more likely to be selected for an enquiry if you file your return early?


The Revenue produced an interesting statistic in its Working Together publication of August 2005.  Here it informed us that of all the enquiries opened into tax returns for the year 2002/03 10% were opened before 31 January 2004 and the remaining 90% were opened between 1 February 2004 and 31 January 2005.


Make of that what you will.


Our Advice:  We generally file returns as soon as they are signed.  We intend to continue to do so.


If you want us to hold on to a return until the last minute we shall respect your wishes.





In the first case of its kind the Revenue has successfully prosecuted an individual for defrauding the Revenue of inheritance tax.


As the executor of her estate John Lamberton took over responsibility for his aunt’s share portfolio which was valued at £402,000.  He sold the shares and paid the proceeds into a stockbroker’s account in his own name.  This in itself was a crime against his aunt’s estate.


As the executor of his aunt’s estate he failed to disclose the investments on her inheritance tax return.


Lamberton was found guilty of one count of embezzlement and two counts of fraud and was jailed for seven years.  The Crown Office is pursuing Lamberton’s assets for confiscation.


In the words of the Revenue it takes the delivery of a correct and complete account very seriously and pursues those who try to avoid making a full and complete return.






If you are in business you probably receive many unsolicited telephone calls like this.


Competition is all well and good but if we were to change suppliers as often as these direct marketing organisations would have us do, we would end up in a state of confusion.


We identify and stick with the suppliers who look after us.  We don’t want to chop and change.


So when we receive an unsolicited marketing call we note the name, address and telephone number of the caller and then report them to the Telephone Preference Service.


Our Advice:  If you too are tired of answering calls from direct marketing companies, register your telephone number with the Telephone Preference Service.  The number to ring is 0845 070 0707.  This is a free service, available 24 hours a day seven days a week.




A truck driver would amuse himself by running over footballers’ agents.  Whenever he saw one walking down the side of the road he would swerve to hit him, enjoy the loud satisfying ‘thump’ and then swerve back on to the road.


At this point you are probably wondering how the trucker could distinguish the footballers’ agents from the humans.  Obviously he saw the trail of slime they left.


One day as the truck driver was driving along he saw a priest hitchhiking.  He decided to do a good turn and pulled the truck over.


He asked the priest “Where are you going, Father?”


“I’m going to the church five miles down the road,” replied the priest.


“Hop in.  I’ll give you a lift.”


The priest climbed in to the cab and they set off.


Next the truck driver saw an agent walking down the road and instinctively swerved to hit him.  But then he remembered there was a priest in the truck with him so at the last minute he swerved away, narrowly missing the agent.  However, even though he was certain he had missed the agent he still heard a loud thud.  Not understanding where the noise had come from he glanced in his mirrors and when he didn’t see anything he turned to the priest and said, “I’m sorry Father.  I almost hit that football agent.”


“That’s okay”, replied the priest.  “I got him with the door!”



Copyright:  K P Bonney & Co LLP 2005.  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.

Back to the home page