January 18, 2006

News! USA Small Business Internet Sales Tax Exemption

Mandatory collection of internet sales tax from internet retailing looks like becoming law in the USA later this year.

A single bill that supports the collection on Internet sales tax from selling over the internet is being forged, but some important issues have yet to be agreed, such as the exemption limit for small businesses.

A sticking point is whether small businesses should be exempt at all and if they should be exempt, the threshold for exemption. The ultimate decision for setting the threshold exemption will rest on the Small Business Administration (SBA).

So far the sales threshold being talked about is $5 million. Below this limit, small businesses will be exempt from collecting the tax.

There are concerns about the impact on start-up businesses for collecting the Internet Sales Tax. Onther concerns relate to destination sourcing, software for collecting and administering the process and the burden of collection.

The House of Representative looks set to introduce Internet Sales Tax later this year.

David
Small Business Resource

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January 8, 2006

USA Small Business Tax in 2006 By President Bush

USA Small Business tax cuts in 2006

In his speech on the economy in Chicargo on 6 January 2006, President Bush briefly mentioned small businesses. His reference to small businesses related to tax cuts. Here's what he said about small business tax:

"We cut taxes on small businesses. Most small businesses pay individual income tax rates -- sole proprietorship or a limited partnership or a subchapter S corporation. So when you reduce individual rates, you're really increasing the amount of capital available for small businesses to expand. And that's important because 70 percent of the new jobs in America are created by small businesses. And when you couple the tax -- reduction in tax rates with incentives for small businesses to invest in new equipment, you can understand why this economy is strong. The small business sector of the United States of America is flourishing. The entrepreneurial spirit is widespread, and more and more Americans are starting their own company."

See comprehensive extract of his speech here:

President Bush Speech On The American Economy For 2006

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December 8, 2005

Small Business Tax: Urgent Issues Task Force Abstract 40 (UITFA 40)

Small businesses face higher taxes due to change in accounting rules relating to short term contracts work in progress under UITFA 40

The new accounting rules will impact professional services firms and tradesmen. Because the new accounting rules relating to short-term contracts could result in a high one off tax charge the treasury is expected to introduce spreading relief to reduce the impact.

Chas Roy-Chowdhury, head of tax at the Association of Chartered Certified Accountants, said he expected the treasury to give small and medium size companies the ability to spread the extra tax charge over three to five years.

Accountancy representatives and the Law Society have lobbied Gordon Brown, the Chancellor, to spread the tax charge over 10 years.

It warned the Treasury that many businesses would struggle even with a 10-year spreading, and that anything shorter than that will see a lot of small businesses folding.

A survey of their members, conducted by the Treasury found that 25% of small businesses faced an increase in their tax bill of more than 50%.

A further 17% of businesses faced a tax bill that will more than double.

David
Small Business Resource

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May 8, 2005

Small Business Tax Ruling On Dividends

A Small company that's family-run that pays dividends to a director who does not fully participate in the business was up against the law last week and the outcome could have significant consequences both husband and wife.

The recent small business tax test case that was lost by Geoff and Diana Jones could cost family-run small businesses substantial sums in backdated tax.

The facts of the case: common corporate structure used by husband-and-wife businesses amounted to an "arrangement" under the so-called settlement provisions of the 1988 Taxes Act. Accordingly, income from dividends received by the non-earning or low-earning spouse had to be taxed at the same rate as the main earner's income.

Mr Justice Park, one of the High Court's most experienced tax judges, agreed with Inland Revenue's Special Commissioners previous decision that tax was properly claimed by the Revenue on dividends distributed to Diana Jones by Arctic Systems (a small IT business).

But the judge also gave extensive reasons for his decision. He said he believed fears that every small business tax case involving husband-and-wife companies would be affected by the "Artic Systems Case" were greatly exaggerated.

If a husband and wife team set up a joint company and ran it together, it did not follow from the Arctic judgement that the husband was necessarily going to be taxed on the wife's dividends.

Mr Justice Park pointed out that it was a feature of the Arctic situation that Mr Jones had provided funds for the "settlement" by working for the company in return for a salary that was below his true earning power.

It would be harder for the Revenue to establish that there was a "settlement" or "arrangement" in which the husband was the settlor, if he was being paid the true going rate for his work, the judge suggested.

The ruling was met with disappointment by the small business community.

"Small business owners will be extremely worried about the implications of this decision," said Andy Mowland, head of research at the Forum of Private Business.

"Business owners will now be looking over their shoulders to see if the Revenue are going to come and knock on their door"

"It must be remembered that a spouse often shares the risk but not the reward of the business," said Mr Mowlah.

"Is it really worth the Revenue pursuing such businesses for small sums of money and seeking to impose complex tax regime based on the uncertainties that surround settlements legislation?" he asked.

David
Small business Resource

Based on article in FT

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