11. VAT on Road Tolls
11.1 VAT at the standard rate will apply to tolls on privately operated road and bridges with effect from 1 February 2003.

11.2 Motorists will be able to recover the VAT borne on the toll providing the charge is less than £10 but must first check that the bridge operators are VAT registered. This includes Aldwark Bridge, Clifton Suspension Bridge, Dunham Bridge, Rixton & Warburton Bridge, Severn River Crossing, Skye Bridge, Swinford Bridge, Shrewsbury (Kingsland) Bridge, Whitchurch Bridge, Whitney Bridge on Wye Bridge.

12. New Guidance - VAT for Smaller Businesses
12.1 A new advice area has been launched on the Customs website aimed at smaller businesses, entitled "Paying your VAT and duties - HOW WE CAN HELP".

13. Leases - Treatment of Inducements
13.1 Where a landlord pays an inducement to a prospective tenant in order to encourage the tenant to enter into a lease, and that inducement payment is payable on signing the lease the sum payable is a standard rated supply irrespective of the status of the lease (taxable or exempt).

14. Liability of Supplies - Vending and Amusement Machines
14.1 Customs have changed their policy on the VAT liability of supplies made by a site owner to the operator of vending and amusement machines and similar. The supplies will no longer be exempt but will be treated to standard rated VAT.

15. Simplified Import VAT Accounting Scheme (SIVA)
15.1 From 1 December 2003 the scheme will allow approved importers to reduce the level of financial guarantee required to operate duty deferment account -for VAT purposes.

15.2 This will permit authorised traders to defer payment of VAT without the requirement to provide full security. Traders wishing to apply for the scheme should do so immediately.

15.3 F or information about the scheme and application forms are available from Customs website, or contact us.

16. Cultural Exemption for VAT
16.1 Concerns "Managed and administered on an essentially voluntary basis" should be eligible for the purposes of the cultural exemption.

16.2 Organisations should now be able to participate in the cultural exemption and a three-year back dating law should be available.

16.3 Now that cultural concerns would be exempt they would lose their right to reclaim input tax e.g. on major equipment, building work etc., especially if there is a requested review for the previous three years.

From 1 April 2004 a minimum Corporation Tax (CT) rate of 19% will be charged on profits distributed to individual shareholders, meaning that small companies distributing profits by way of dividend will no longer be able to take advantage of the £nil starting rate of CT on the first £10.000 of profits.

Therefore, the advantages of incorporating small, sole trader businesses have been significantly reduced, albeit that it remains an advantage to be incorporated. Also, limited liability should not be underestimated in these litigious times.

The following examples are for the current tax year 2004/05 in respect of a business owner with no other sources of income. Earnings from the Limited Company are £4,745 to cover personal tax and allowances and to ensure a full National Insurance Contributions record:

If you check against the figures we provided in the 2003 Newsletter, you will see how the new 19% tax charge relating to dividends has affected the tax saving offered by Incorporation.

Limited Liability - Advantages
• Possible overall saving on tax (Income Tax & Corporation Tax) as opposed to Income Tax only.

• Potential savings on Class 2 and Class 4 NIC.
• More tax efficient payment of pension contributions.

• More flexibility on determining the taxable level of personal income for each tax year (which may be advantageous when considering the new tax credits).

Limited Liability - Disadvantages

• More stringent requirements for expenses incurred.

• Possible tax implications of provision of benefits in kind.
• Lack of flexibility, in so far as once incorporated more difficult to become unincorporated.
• More stringent accounting requirements as set out by the .Companies Act.
• More stringent time limits for filing accounts with the Registrar, failure to do so could result in substantial fines.

• Additional costs of preparing company accounts.
• Transparency of business results as accounts have to be filed in the public register.

Whether to incorporate or not will very much depend upon individual circumstances and clients should contact us to discuss the possibilities.

A word of caution, at a recent tax lecture we attended was that there have been comments that the Government are contemplating bringing in new measures in the March 2005 budget to reduce the benefits of incorporation.