One of the benefits of having a limited company is the flexibility it offers to shareholders and owner directors in how to take remuneration and dividends. In addition, some company owners choose to shelter a large proportion of profits inside the company, rather than incur additional taxation by withdrawing money which is surplus to their personal requirements. If larger personal funds are required for a period of time, a tax planning strategy for shareholders has been for companies to provide them with tax efficient access to retained profits by granting a company loan. Provided the loan is repaid in full 9 months after the end of the company’s accounting year-end, and HMRC’s official rate of interest is paid by the borrower, no tax is due. If the loan remains outstanding 9 months after the company’s accounting year-end however, a tax charge of 25% is made on the company, which becomes repayable only once the loan is repaid. (more…)
June 19, 2013
Do you have a gold card or executive membership for any clubs and services? Most clients will have experienced the slightly superior service they will be offered as a ‘high net worth’ customer. Almost every organisation is tailoring its services to suit the perceived value of the individual customer; it’s often wrapped up within the phrase ‘one-to-one’ marketing.
Keen not to miss the boat, HMRC also adopted a similar strategy to segmenting its ‘customers’ and the ‘service grade’ it provides when it originally launched the Affluent Compliance Team. This was set up in 2010 to carefully scrutinise the financial affairs of the wealthiest taxpayers in the UK and has recently been expanded as we will discuss.
June 17, 2013
The London Olympics is a tough act for any sporting challenge to follow. Over the years RJP has and continues to support and sponsor community sports initiatives – Surbiton Hockey Club and Thames Ditton Cricket Club being two local ones. When the organisers of GB Row approached RJP to sponsor their rowing challenge, we were immediately taken by the sheer inventiveness and challenge of this event. (more…)
May 23, 2013
Anyone who runs a limited company and works as a freelance consultant or contractor will be aware of IR35 and how it can affect their tax liability. The IR35 legislation was originally introduced in the 1990s to expose taxpayers who were effectively employees but were being paid for their services through a limited company and therefore able to reduce their tax and national insurance liabilities. (more…)
May 23, 2013
Earlier this month it was confirmed by HMRC that all UK overseas territories – The Cayman Islands, Anguilla, Bermuda, the British Virgin Islands, Jersey, Guernsey, Gibraltar, Isle of Man, Montserrat and the Turks and Caicos Islands – now have in place automatic tax disclosure deals with the Government. This means they are automatically exchanging financial information with the UK and France, Germany, Italy and Spain to identify taxpayers who are under-declaring their income.
May 23, 2013
Over the past few months we have blogged about the issue of corporate entities and the benefits of a business considering different structures, which may include an LLP or a limited company. Limited liability partnerships (LLPs) are a popular choice for those providing professional services because although they may not be as tax efficient as a limited company, they offer greater flexibility.
It is common for LLPs to have a ‘secondary’ band of partners, usually known as salaried partners. These partners will typically receive a salary and may perhaps be allocated a small share of business profits, they are usually treated as self employed and HMRC have not generally challenged this status. Now however, in line with HMRC’s strategy to close as many ‘loopholes’ of (what it regards as) tax avoidance as possible, there are some important changes to be aware of. (more…)
May 14, 2013
One of the oldest adages in the world of tax is ‘never let the tax tail wag the commercial dog’ and we hear it repeated time and again. No one likes to pay high taxes but being seduced by the prospect of lower tax should never cloud one’s judgement and become the sole justification for a business decision.
When making tax planning decisions there are many factors to consider, not least of which is the long term consequence of a particular action. Today’s tax policies may have changed in two or three years’ time and reversing a decision can be costly. In some instances, flexibility can be the most important consideration for a business, even if it means paying slightly higher taxes; this issue often lies at the heart of deciding which business structure to adopt. (more…)
April 25, 2013
The issue of whether or not to incorporate your business into a limited company is a topic previously discussed in our blog. There can be clear tax planning advantages to incorporation as it creates flexibility over levels of income chargeable to personal tax, and prevents profits immediately becoming chargeable to tax at the highest personal tax rates. There are other, commercial benefits too. (more…)
April 19, 2013
HMRC has recently turned its attentions to property owners and investors with the launch of new taskforces and initiatives to recover additional tax revenues. Firstly, aimed at buy-to-let landlords in the South East, HMRC currently has a taskforce monitoring the activities of landlords whose self assessment tax returns may not reflect the value of their property portfolios. If you have rental property and think you may have underpaid tax, please seek professional advice. This particular initiative is not accompanied by an opportunity for landlords to avoid penalties for outstanding tax owed and any declarations should be treated with caution to avoid further enquiries being opened. (more…)
April 9, 2013
In our Budget review last month we mentioned one interesting announcement of a new tax relief, which had not been expanded upon in HMRC’s release notes. This is the opportunity for employee shareholders to dispose of shares without incurring capital gains tax (CGT). Further details have now been published and present an interesting new proposal for owner managed companies to consider.
These new proposals effectively require an employee to relinquish some of their employment rights and adopt a new ‘employee shareholder’ employment status. They are then able to acquire shares in their employing company through the adoption of this status. These shares will in turn attract new tax reliefs which will ensure that shares acquired up to a value of £2,000 will not attract tax and national insurance contributions when they are acquired, and sale proceeds received of up to £50,000 from eventually selling the shares will not be charged to capital gains tax. (more…)
April 4, 2013