Posts Tagged ‘Corporate tax’

Capital Allowances – good news and bad news…

Posted on: September 17th, 2012 by Leighton Reed No Comments
Leighton Reed, Director, MHA Broomfield Alexander

Leighton Reed, Director, MHA Broomfield Alexander

We have seen some reductions in capital allowance rates from April 2012, but it is not all bad news.  Set out below is a reminder of the good and the bad.

GOOD NEWS

100% first year allowances

These continue to be available for:

  1. Qualifying energy and water saving plant or machinery.  (See http://etl.decc.gov.uk/)  Included are items such as new energy saving boilers, refrigeration equipment, lighting, heating and water systems.
  2. New low-emission cars (either electrically propelled or with CO2 emissions not more than 110g/km).
  3. Assets used for qualifying R&D.

Short life assets

These can still be depooled and balancing allowances claimed on an individual asset basis when they are disposed of or scrapped within 8 years (previously 4) of purchase.  Computers, other technology assets and tooling are typical candidates for this treatment, but cars are not eligible.  The cost of tracking the assets needs to be weighed against the potential tax cash flow benefit.

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Payments to directors

Posted on: July 6th, 2012 by LeightonReed No Comments
Leighton Reed, Director, MHA Broomfield Alexander

Leighton Reed, Director, MHA Broomfield Alexander

Any payment made to a director as part of their remuneration package is generally subject to tax that is usually collected via the PAYE system. The payments made by the employer are allowable expenditure and reduce the employer’s taxable profits.

However, many smaller limited companies pay personal expenses on behalf of directors. These personal expenses do not form part of the director’s remuneration package and should not be included as an expense in the company’s accounts – a company may not deduct expenditure unless it is incurred wholly and exclusively for the purposes of its trade.

Which begs the question, how are these personal expenses of the director treated in the company’s accounts? Unless reimbursed by the director, such personal expenses are debited to the director’s loan account.

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Taking on extra staff to cover the Olympics?

Posted on: June 29th, 2012 by LeightonReed No Comments
Leighton Reed, Director, MHA Broomfield Alexander

Leighton Reed, Director, MHA Broomfield Alexander

Businesses across the UK are anticipating busy trading activity during the Olympics and it is expected that many will take on temporary staff to cope with increased demand. With that in mind, HMRC is reminding business owners to be extra cautious when employing temporary staff through labour agencies for any kind of work during seasonal and market demand.

Businesses operating in the leisure and construction sectors, including catering, food processing, hotels, security and builders, are being warned that they could inadvertently be hiring employees who are working illegally in the UK, or who are earning below the national minimum wage. Agencies who supply such temporary staff, known by HMRC as ‘gangmasters’, may also fail to pay the correct, if any, VAT, national insurance contributions and PAYE deductions.

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HMRC visits: Trouble in store?

Posted on: May 24th, 2012 by LeightonReed No Comments

 

Leighton Reed, Director, MHA Broomfield Alexander

Leighton Reed, Director, MHA Broomfield Alexander

Many businesses dread a visit from HMRC.  There is always the worry that something may come out results in paying more tax but there is also an understandable sense of dread at the potential disruption it could cause in the run up to the visit, during the visit and even following the visit.   However, there are a number of things you can do to make the experience far less stressful.

Preparation    

  • Most HMRC visits are pre arranged either by telephone or letter – If the appointment is made by telephone, ask the officer to confirm in writing the details of the visit – not only date and time but the expected length of the visit.
  • Ask for confirmation of who will be coming, what their roles are in the enquiry overall and exactly what records if any they want to see.
  • Ask at the outset are there any particular risk areas they have identified in selecting you for an inspection.
  • Have all of the requested records ready for the visit.
  • If they are to be left in a room make sure it is clean and only has the information requested in it.
  • Of course it may not be possible to prepare in advance if HMRC don’t give warning of a visit.

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Business succession – tax planning and potential pitfalls

Posted on: February 14th, 2012 by Leighton Reed No Comments
Leighton Reed, Director, MHA Broomfield Alexander

Leighton Reed, Director, MHA Broomfield Alexander

For all family businesses, succession planning is a must, given that sooner or later everyone wants or needs to retire.

However, if you own a family business (whether that be in whole or in part), there is more to retirement than just deciding not to go into the office any more. Aside from ensuring that you have sufficient funds to retire, the question of what happens to the business becomes paramount.

Key issues for consideration include, who will manage the business after you retire and how will ownership be transferred?

There are a number of potential exit strategies for a retiring business owner, such as an outright sale, a management buyout or a transfer of ownership to other family members.

Another key issue to consider is tax, with careful planning required to ensure that any potential tax exposure is minimised. Two of the key tax implications for succession planning are briefly discussed below. In addition, some of the potential pitfalls are also identified, which highlights the need not only to obtain specialist advice but also to start the planning process as soon as possible.

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End of year tax planning pointers

Posted on: December 7th, 2011 by LeightonReed No Comments
Leighton Reed, Director, MHA Broomfield Alexander

Leighton Reed, Director, MHA Broomfield Alexander

Whether you are a business owner or a full time stay-at-home parent, there are measures you can take now to minimise your tax liability this tax year.

Income tax saving for couples

Any personal allowance (£7,475 for 2011/12) that is not used at the end of a tax year cannot be carried forward. However, couples can make use of each other’s unused allowances through methods such as transferring ownership of income generating assets (such as savings and investments). Couples can also jointly own income generating assets, where the income will automatically be split 50-50, unless otherwise specified, but the income paid must correspond to the proportion owned (this is only possible if you are married or civil partners).

Extracting profits from a company

Salary

National insurance contributions are expensive, but salary can be deducted from taxable profits in the company, so if profits are taxed at the marginal small companies rate (currently 27.5 per cent), there is very little difference between extracting profits by way of salary or dividend for higher rate taxpayers.

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Staff Christmas gifts

Posted on: November 14th, 2011 by LeightonReed
Leighton Reed, Director, MHA Broomfield Alexander

Leighton Reed, Director, MHA Broomfield Alexander

It’s less than 7 weeks to Christmas!  Therefore, a seasonal reminder that employers can give employees a benefit in kind without incurring any tax/NICs.

To qualify, the benefit in kind needs to be ‘trivial’.  Although there is neither a monetary limit below which a benefit would be regarded as trivial, nor is there a strict definition of a trivial benefit in kind in the books, it is possible to give a benefit in kind without incurring any tax or NICs.  HMRC take the following factors into consideration when determining a trivial benefit:

  • The cost of providing the benefit to each employee;
  • The reason for the benefit;
  • The resource cost of dealing with the administration for the benefit compared to the amounts of tax and NICs at stake.

Therefore provided the benefit is no more than e.g. a turkey, bottle or two of wine, or a box of chocolates, it should be classed as a trivial benefit in kind and incur no tax or NIC.

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Share transfers

Posted on: August 24th, 2011 by Liz Mounfield No Comments

The new model articles for private companies highlight a change in the law which needs to be carefully addressed by directors of private companies when considering share transfers.

The 1985 Table contained the following provision in article 24: “The directors may refuse to register the transfer of a share which is not fully paid to a person of whom they do not approve”. This was inappropriate for private companies for at least three reasons. First, private companies rarely had partly paid shares. Secondly, in so far as this article was relevant to a private company it was essentially a credit control measure. The directors might be happy that A should owe money to the company but considerably less than happy that B should owe money. Thus when A tried to transfer his partly paid shares to B, the company could refuse to register the transfer to B. Thirdly, most private companies would extend this article to cover fully paid shares so as to allow the board to exclude undesirables from membership generally. A typical special article might read: “The directors may, at their absolute discretion and without giving any reason therefor refuse to register the transfer of any share to a person of whom they do not approve”.

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R&D unravelled…

Posted on: July 26th, 2011 by Leighton Reed No Comments
Leighton Reed, Director, MHA Broomfield Alexander

Leighton Reed, Director, MHA Broomfield Alexander

The Government has recently implemented further changes to the Research & Development (“R&D”) tax relief schemes, and further changes are set to take effect from 1 April 2012.  By way of background, we have addressed two key questions prior to outlining these changes:

1.       What qualifies as R&D for “tax purposes”

What qualifies as R&D for “tax purposes” is often significantly different from what people perceive to be R&D.  We have experience of submitting successful R&D claims for companies which initially thought their activities would not qualify.  We have assisted numerous companies in the submission of successful R&D claims, maximising their R&D entitlement by ensuring the entire range of activities (which can include routine work associated with the R&D project) and costs have been captured and claimed.

If you can answer yes to any of the following questions (or if you think the answer is yes) we suggest you speak to Leighton Reed, or a member of our Tax Team who would be happy to assist:

·         Are you investing resources to keep ahead of the game?

·         Are you doing something that is innovative or unique?

·         Are you working on solving a problem that has never been solved before (or the solution is not within the public domain)?

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Giving workers a share in your company can be a great idea, but be careful how you do it

Posted on: December 23rd, 2010 by LeightonReed
Leighton Reed, Director, MHA Broomfield Alexander

Leighton Reed, Director, MHA Broomfield Alexander

MHA Broomfield Alexander publishes a series of articles focusing on business advice and information. This article appeared in the Business Advice column, Western Mail, 22 December 2010

Incentivising employees by offering them a share in your company can be a great idea – but beware. You need to carefully consider the arrangements upfront, otherwise it could end up costing the staff you’re trying to reward and also you.

If you were to simply offer shares to an employee at a discount on their market value or for free, the employee would be subject to income tax on the discount and possibly national insurance.  Similarly, if you were to grant the employee an unapproved HMRC option which they can exercise at today’s price or at par, then any growth from the grant of the option to exercise will be subject to income tax and possibly national insurance.

Furthermore, on a sale of the shares acquired in the unapproved circumstances described above, there is a risk that part of the future growth may be liable to income tax and national insurance rather than capital gains tax.  This is not tax efficient as currently the capital gains tax rates are significantly lower.  However, it is possible to ensure that the future growth is locked into the capital gains tax regime by the employee and employer entering into an election within 14 days of the acquisition of the shares.

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