By Ian McTernan - Author of ‘How to use companies to cut your property tax bills’
As usual, a speech by the Chancellor is full of fine words and very short on detail. However the devil in the press releases was issued by the Revenue immediately after he sat down.
In total there are 43 this year, which must be a record!
Many of the press releases issued by the Revenue deal with technical aspects which are not of interest to the general public.
However, of interest to the many property investors are the following:
Tax-free dividends abolished for small companies
What this means is that if the company pays out all it's profits in dividends then the 0% band for corporation tax does not apply.
This results in additional tax being payable by the company of up to £1,900. It is not clear at this stage exactly how this will be applied in practice.
This measure will affect mainly small service companies and others who have managed to escape the clutches of IR35, together with any small trading companies that no not need or choose not to retain any profit within the company.
Watch out for Pre-owned assets
This will apply a charge to tax on the deemed rental value of a property where the property has been gifted or sold for an undervalue.
A typical example is where the parents gift their property to their children to avoid IHT, but continue to live in it. This tax will apply from 6th April 2005, but will be applied to all property transferred since 18 March 1986.
It does not apply to properties that were transferred at full market value and paid for in cash.
Registration of tax avoidance schemes
Taxpayers will then have to enter the scheme number on their Tax Return. In house and other schemes will have to be disclosed to the Revenue and full details given. As usual, there will be a system of penalties for those that fail to follow the rules and I expect this will be enforced!
Income Tax and CGT Tax Bands
Corporation Tax bands
No Change to Stamp Duty