Year End Tax Review 2009/2010 Contents Lead articles The year ahead... This year, next year Pension hit Employees Too much NIC NIC and pensions Company cars Tax-free benefits Business - General Time to incorporate? His and hers Family bonus Profit and loss Show me the money Can't pay, won't pay? Turning back the clock Business - VAT Standard VAT or flat VAT? VAT goes down - must come up? European revolution A good start for VAT Happy returns? Investments Top-up savings Rainy day money Capital Gains Gains favoured Splitting gains A place in the country Holiday lets end Families Family fortunes Where there's a Will Credits and debits Piggy banks Still trustworthy? Administration Penalty shoot-out Paperwork, paperwork Pay tax later Opportunity knocks again Charity Give and save Non-Domiciled People Home and away Interest Interesting times

Family bonus Where one spouse employs the other, it is necessary to be able to justify the level of income paid - if the salary appears to be too generous for the duties involved, HM Revenue & Customs have traditionally not allowed it to be an effective transfer for tax purposes. In recent years, by contrast, the National Minimum Wage rules may require a minimum amount to be paid - unincorporated family businesses are exempt in respect of family members living at home, but family companies may be affected. HMRC are responsible for the NMW as well as for PAYE on salaries, so they may even argue that more should be paid out. Traditionally, many people have paid their spouse a little less than the lower threshold for NIC, to avoid the significant contribution that was required when you crossed that line. The rules changed a few years ago, so that there are no NIC to pay on the first £110 per week, even if you go over that limit, but benefits will be earned on pay above £95 (in 2009/10). So you can save tax on a salary of £110pw to a spouse who earns benefits, without having to pay any NIC at all. A higher salary - say £115 - will still save tax for the payer, but there will be NIC on the £5 by which it exceeds the threshold. The "downside" is that pay which earns benefits (i.e. is bigger than £95pw) has to be reported to HMRC under the PAYE system (for the entitlement to be recorded), so there is paperwork to complete even if there is no charge. Action Point! Review the amount paid to family members