With house prices falling sharply over the last few years, it is possible that people selling inherited property or land will receive a lot less than the probate value.

The Wealth Protection Report notes that a special “loss on sale of land” relief can be obtained when the “appropriate person” sells an “interest in land” which is included in the estate of the deceased within four years of the death. The result is that the “sales value” can be swapped with the “value on death” and as a result reducing the property value for inheritance tax purposes. If you have already paid the tax, you are eligible to claim a tax refund in full.

For example take a house which was valued at the time of death at one million pounds. If it is sold 18 months later for 700,000 pounds the executors can claim relief under IHTA84/S191 (1) and the date of death value is cut to 700,000. Assuming there were no more assets within the estate, this would cut the inheritance tax bill by 130,000 pounds!

One caveat to note is that in order to qualify, the price of the property must have fallen by more than 1,000 pounds or 5% from the probate value.

How would you feel if your business had to pay sales tax in a state or country where it had no physical presence?

This is the dilemma that Amazon is facing as a number of states in the US are passing legislation that would require businesses to collect sales tax if they have any marketing affiliates in the state.

In a response to the legislation, Amazon have decided to make a potentially risky decision by choosing to end their business relations with affiliates in North Carolina, Rhode Island and now also Hawaii.

In an email sent to Hawaii affiliates on Tuesday, Amazon wrote: “We were forced to take this unfortunate action in anticipation of actual enactment because of the uncertainty and timing of a veto, and the possibility that a veto could be overridden,”

Is this a bold move by Amazon in an attempt to call the states bluff? Amazon pays out millions of dollars a year in commission to affiliates who refer customers to Amazon from websites and blogs. This commission would be taxed as income which the states would now be losing out on.

It’s quite fitting that Amazon’s slogan is “And you’re done” as this messages seems to speak with meaning to both affiliates and the state legislators themselves. What is your opinion? Do you think the states that are proposing these taxes are shooting themselves in the foot? It would be interesting to hear your comments.

What with Chrysler going Bankrupt and GM not too far behind, redundancy is becoming more and more real.

Despite redundancy being a horrible experience for anyone there can be a tax advantage.

Any UK redundancy payment made outside of an employment contract which is less than 30,000 pounds is tax free. Any amount above this is simply taxed at the marginal rate. It is often possible to delay a termination notice until a year later saving even more in tax.

If you become unemployed there is also a high probability that you will have over paid tax. Everyone gets a tax free allowance, and this is usually divided evenly through the year. If for example you became unemployed in January, you would not have got three months of allowances.

Easter is this weekend and we thought it would be interesting to highlight a recent proposal to tax chocolate in the UK.

Dr David Walker, who proposed the controversial tax in a similar way to alcohol and cigarettes, has seen his proposal rejected by doctors. Delegates at a British Medical Association (BMA) conference in Clydebank, West Dunbartonshire, voted down the plan by just two votes.

Dr Walker said chocolate was a “major player” in problem weight-gain and its associated conditions including high blood pressure and joint pain. He said he was “disappointed” but glad his proposal had provoked debate.

But food industry leaders said such a proposal would only result in lighter wallets, not smaller waists.

Here at the UK Tax Blog we welcome moves to reduce tax rates, however we also understand that sometimes people need a nudge to do the right thing. Will a tax on chocolate help people become more healthy? This ultimately depends on the elasticity of demand for chocolate, an economic concept which looks at the effect of demand to a change in price. The more inelastic the demand, the less price will have an influence on the demand.

Often the government uses health as an excuse to increase tax revenues. Taxes on alcohol and cigarettes have had little effect on demand unless increased significantly. What may seem like a good idea in theory may have a different result in reality.

What do you think? Should we have a tax on chocolate similar to cigarettes and alcohol?  Is Dr Walker only looking at the health benefits and not taking into account the economics and behavioral aspects behind the proposed tax?

Apologies for the lack of posts. The end of the tax year has once again taken its toll on our time.

Tax has been getting a great deal of press coverage recently, as the G20 met in London to discuss how it was going to deal with tax havens amongst other things.

Due to the pressure Uruguay, Costa Rica, the Philippines, and Malaysia, the last four countries on a blacklist of uncooperative tax havens have finally agreed to cooperate with tax auothirites around the world.

A number of other countries  including Luxembourg, Switzerland, Austria, Liechtenstein, Monaco, Andorra, and Singapore moved quikcly earlier this month to ensure that they were not added to the blacklist and instaed placed on a “grey list”.

The G20 countries threatened the use of sanctions against blacklisted tax havens in their meeting. Potential sanctions for transgressors include extra audits of those who use tax havens and curbs on tax deductions claimed by businesses using the territories.

This is definietly a step forward for transparency and openess from some of the most secretive countries in the world.

Happy New Year. Here’s to 2009 being a better one than 2008.

With the American presidential election happening this week, we thought it apt to highlight a post from Kiplinger

The post is quite interesting for both US readers, as it shows a number of tax deductions that they might have overlooked, as well as from a UK perspective, to see the difference between what we can claim as a tax deduction and what our American allies can:

1.State sales taxes.
2. Reinvested dividends.
3. Out-of-pocket charitable contributions.
4. Student loan interest paid by Mom and Dad.
5. Moving expense to take first job.
6. Military reservists travel expenses.
7. Child-care credit.
8. Estate tax on income in respect of a decedent.
9. State tax you paid last spring.
10. Refinancing points.
11. Jury pay paid to employer.

The above list also highlights the benefits of using a tax accountant, often they can save more money then they cost. Do you have any obscure tax deductions or tax refunds to add to the list?

How will the new tax rates affect you? Ask the experts in the field. Ask your tax attorney now!

Earlier this week the UK government announced plans to change the tax rate for both businesses and higher income earners in an attempt to help the ailing economy.

The main revelations form the pre-budget report include:

•  A New super income tax, of 45%, will be brought in for those earning £150,000 or more, starting from April 2011.
• National Insurance contributions will rise by 0.5%, for both employees and employers
• Value Added Tax will be reduced to 15% from 17.5%
• Basic rate tax payers will see an increase in their personal allowance of £120 a year being made permanent.

There are both winners and losers from the changes, however the biggest impact will be seen on the wealthy, who will not only face a higher tax rate but also a withdrawal of their personal allowance. Those earning between £100,000 /£106,500 and £140,000/£146,500 will be worst hit, experiencing a loophole whereby they will be paying an effective tax rate of 50%, more even than those on the 45% rate for those earning more than £150,000.
With the new changes to the tax rates and personal allowance make sure that the Inland Revenue have calculated your tax correctly by using an income tax calculator, and claiming tax that you might be rightfuly due.

How will the new tax rates affect you? Let us know your thoughts and comments.

I am sure that everyone has read in the press about the failure of one of Americas biggest investment banks, Lehamn brothers. A number of other companies, such as AIG, are in a similar position and could go bankrupt too. If you are one of the employees working for these companies, facing possible redundancy,  you might be wondering what your options are regarding how your redundancy payment is taxed.

Tax on Redundancy Payments
The first 30,000 pounds of any redundancy payment is tax free, however there is a catch. Any payment is not tax free if there is a sum stipulated in your contract. It might be a good time to dig up your work contract and check!

One way to reduce your tax bill however, is to ensure that your employer makes any payment after you have received your P45. By doing this, you will only be taxed at the basic rate of 20%, if your income for the year has not exceed the upper earnings limit.

With everyone feeling the pinch from higher petrol prices and increased interest rates, now is not the best time for the UK government to increase the basic rate of tax. Since April the basic rate of tax has doubled to 20 pence in the pound. There are however a few ways in which you can reduce your tax bill which most people do not take full advantage of:

Income Tax Allowances

Every citizen in the UK is given a tax free exemption, which this year amounts to 5435 pounds.  This is the total of all income that you can earn before any tax is due. Many married couples do not know about a simple technique that could save them hundreds of pounds in tax a year. Take the following example: Jack and Jill are married. Jack is a doctor and earns 75,000 pounds a year.  Jack and Jill have a savings account in both their names which receives 2000 pounds of interest each year. Because the account is in both their names, tax is owed to the Inland Revenue on jack’s 1000 pound share. If Jill had opened the account in her name, all the interest that was received would have been tax free as Jill does not work, saving over 400 pounds in tax.

Capital Gains Tax Allowances

Similar to Income tax, everyone in the UK has a capital gains tax allowance which for this year is  9,600 pounds. Shares or property that have gone up in value and have been sold at a gain can be transferred between partners, allowing both allowances to be used to total 19200 pounds. Doing this maximizes allowances between married couples. Another factor that could potentially save you money is the government rule allowing  capital losses to be carried forward to future years.

Home Businesses Expenses

If you have a home business you may be missing out on a number of valuable tax savings. Having a home business allows you to reclaim a share of the cost of expenses for the home such as electricity and telephone bills. The easiest and quickest way to claim back any of the expenses that you might be due would be through your Self Assessment Tax claim. More information about this can be obtained from the Inland Revenue website.

Please note that all the information above and contained on this site is for general reading purposes and should not be regarded as tax advice or help. You should not rely on the above data or information to make (or not make) any personal financial decisions. Always remember to get professional advice for your own particular situation.

Things have been hectic and busy here at the Tax Rebate Blog this month, which has not given us as much time as we would have liked to update the blog.

There have been a number of interesting posts in the tax world recently. With the up and coming American election I thought it might be interesting to focus on the best of these:

TaxGirl - Writes about which of the presidential candidates has the best plan for “middle class” America and how depending on where you live in America, middle class can be very different. An excellent post, be sure to give it a 5 minutes read when you get a chance.

The Wandering Tax Pro - Writes about the tax returns of the presidential candidates, Barack Obama and John McCain, providing links on the location for their tax returns for 2006 and 2007. A similar system for the UK would make our Members of Parliament much more accountable after the current expenses debacle.