Other Taxes & Tax Planning
There are literally thousands of deductions and allowances available that can reduce your tax liability, but unless you get tax advice from an expert you cannot possibly know all of them. With tax legislation becoming ever more complex and with the latest attack on aggressive anti-avoidance it is wise to talk to an independent professional.
If you choose one of our compliance packages all your tax compliance and most of your tax advice & planning will be taken care of.
For most clients this is all that they need. However sometimes tax advice is needed over and above this especially if your business or personal tax affairs are complex.
This is particularly relevant if you are embarking on a project that needs to be structured in the most tax efficient way or you may want someone to check that your tax liability is correct.
Careful tax planning means more money is retained by you or in your business and so is an important aspect in wealth creation.
If you want to ensure that you are minimising your taxation liabilities you need to talk to us.
We also provide advice and planning in all other areas of taxation, including:
Capital gains tax
CGT effects most small business owners at some point
The Capital Gains tax is chargeable as a result of gains made from selling or transferring assets, most commonly in the form of the share capital of their business or other significant personal assets (like second homes for example).
Our tax consultants will work closely with you to optimise Capital Gains tax returns through a variety of reliefs and exemptions, a number of which have been created relatively recently.
However, tax planning is the key to minimising Capital Gains tax. It is well worth discussing your long term plans with your Commercial Manager and our tax team, so you are able to structure your assets in a way which keeps Capital Gains tax to a minimum when the time comes to sell.
Stamp Duty Land Tax
A brief history
Stamp Duty Land Tax (SDLT) was introduced on 1 December 2003 and replaced Stamp Duty in respect of land transactions.
What is SDLT?
SDLT is a tax that is generally payable on the purchase or transfer of land and property in England, Wales and Northern Ireland. It is also payable in respect of certain lease premiums.
Purchasers of property are only able to register their ownership at the Land Registry if they have a Land Transaction Certificate issued by HMRC. This certificate will only be issued when the purchase has been reported to HMRC on an SDLT return. All property transactions valued at £40,000 or more must be so reported.
SDLT is usually chargeable by reference to the cash value of the transaction. However the definition of ‘consideration’ is very wide and is intended to catch all sorts of situations where value might be given other than in cash. For example if the purchaser agrees to do certain work on the property or to take on the mortgage debt secured on a property.
Rates of SDLT
Major changes to the way that SDLT is calculated on residential properties came into force on 4 December 2014. Prior to this change, SDLT was charged on the “slab” basis: whatever rate applied to the total value of the property was applied to the entire purchase price. So if your purchase was £275,000 you would pay a 3% charge on the total price, £8,250.
The new rates are applied on a graduated basis, like Income Tax. In the above example, the SDLT charge for a property purchase of £275,000 would be £3,750, a saving of £4,500.
SDLT is payable at the following rates on residential properties:
Rate Residential property
A new higher rate of SDLT was introduced on 1 April 2016 and applies to purchases of additional residential property such as buy to let and second homes. The new higher rate is 3% higher than the current SDLT rates and applies to the purchase of additional residential properties valued at over £40,000.
The higher rates will apply to purchases of additional residential properties in England, Wales and Northern Ireland. The higher rate will not apply to individuals who own only one residential property, irrespective of the intended use of the property. There are also some other limited reliefs from the surcharge.
A special 15% rate is applied to residential properties held in a ‘corporate envelope’ costing over £500,000 and purchased on or after 20 March 2014.
The current rates of SDLT for the purchase of non-residential property are as follows:
Rate Non-residential property
Property in Scotland
Scottish Land and Buildings Transaction Tax (SLBTT)
The SLBTT came into force on 1 April 2015 and replaced SDLT in Scotland. In general a transaction with an effective date on or after 1 April 2015 will be subject to SLBTT if the land is situated in Scotland. However, in some cases, there will be transitional measures in place. There are two sets of rates for residential and non-residential properties.
Scotland: Land & buildings transaction tax (LBTT)
LBTT on non-residential and mixed use properties
|Rate Non||Residential property|
These rates are applied on a graduated basis with the portion of the purchase price within each tier charged at the applicable rate.
There is a 3% SLBTT supplement for purchases of additional residential properties in Scotland that came into effect from 1 April 2016. the rules are similar to those in operation across the rest of the UK.
Notifying HMRC of liability to SDLT
This may be done by the solicitor acting for the purchaser of the property. Notification is made using an SDLT return (SDLT1). The quickest and easiest way to file SDLT returns is online. The alternative is to complete a paper SDLT return, which may involve the completion of supplementary forms.
SDLT returns must be submitted to HMRC within 30 days of the transaction.
If you do not file your SDLT return by the due date you will become liable to an automatic fixed penalty. This is initially £100 but increases to £200 if the return is more than 3 months late. An additional tax based penalty becomes payable if the return is more than 12 months late.
Payment of SDLT
The tax is due for payment within 30 days of when the purchase contract has been substantially performed. In most cases this means when the purchaser takes possession of the property on completion rather than on exchange of contracts.
HMRC prefer payment to be made electronically to their account at Shipley quoting an 11 digit Unique Transaction Reference (UTR). You will find your UTR on the online submission receipt (SDLT5) if you file your return over the web, or you can use the UTR on your paper SDLT return. Late payment of the tax will mean a charge to interest.
SDLT on leases
SDLT is payable both by reference to lease premiums and to the rental element of a lease. The premium is treated for SDLT purposes the same as if it was a payment for the purchase of a freehold. However, for non-residential properties the nil rate band does not apply if the relevant rental figure for the lease is more than £1,000 per year.
In cases where SDLT is payable both of the following are calculated separately and then added together to obtain the amount of SDLT payable:
- the lease premium or purchase price
- the net present value of the rent payable
SDLT and non-residential properties
As is apparent from the table above, SDLT applies to non-residential properties as well as to houses and flats. So SDLT will also be due in respect of the purchase of:
commercial property such as shops or offices
any other land or property which is not used as a dwelling
six or more residential properties bought in a single transaction
Other SDLT exemptions and reliefs
There are a number of situations where a property transaction does not need to be reported on an SDLT return. These include transactions where no money or value changes hands, property that is left in a will and the transfer of property in a divorce or when a civil partnership is dissolved.
In addition, you do not need to notify HMRC of property transactions where the value involved is less than £40,000. However if the new owner takes over a mortgage debt above £40,000 this will count as consideration. In such cases an SDLT return will be required and SDLT will be payable unless the property was left in a will.
SDLT returns are also required in the following situations but, if the relevant conditions are satisfied, no SDLT will be payable:
- house-building company buys an individual’s home
- ‘chain-breaking’ purchases
- compulsory purchases as part of property development
- property developer subject to planning obligations
- transfers of property between companies in the same group
- transfers of property to a recognised charity
- ‘right to buy’ properties
- registered social landlords
Other special situations
When two or more property transactions involve the same buyer and seller, special rules apply. Such transactions are treated as being ‘linked’ for SDLT purposes. The rules may also apply when the ‘linked’ transactions involve people connected to a buyer or seller.
There are also special rules that apply when someone buys a property through a formal ‘shared ownership scheme’. These are generally operated by an approved qualifying body such as a housing association, local authority or other public sector body.
Annual Tax on Enveloped Dwellings (ATED)
An Annual Tax on Enveloped Dwellings (ATED) came into effect from 1 April 2013. The annual tax is payable by certain non-natural persons that own interests in dwellings valued at more than £2 million. This provision affects certain companies, partnerships with company members and managers of collective investment schemes described in the legislation as non-natural persons (NNPs).
From 1 April 2016, charges on affected properties will be as follows:
- More than £500,000 but not more than £1 million – £3,500
- More than £1m but not more than £2m – £7,000
- More than £2m but not more than £5m – £23,350
- More than £5m but not more than £10m – £54,450
- More than £10m but not more than £20m – £109,050
- More than £20 million – £218,200
There are certain NNPs which may not be required to pay the ATED such as:
- property development, investment rental and trading businesses;
- residential properties open to the public for at least 28 days a year on a commercial basis;
- residential properties held for employee accommodation;
- residential properties owned by a charity and held for charitable purposes;
- working farmhouses;
- diplomatic properties; and,
- some other publicly-owned residential properties.
For the ATED period 1 April 2016 to 31 March 2017, both the return and payment are due by 30 April 2016. A copy of the ATED return is available online and HMRC has published a comprehensive notice containing information about ATED together with instructions as to how to complete the form.
How we can help
We would welcome the opportunity to assist you and to determine if there might be ways to limit your liability to pay SDLT. We could then discuss with you the steps that you could take to reduce your liability. These will normally be quite complex so may only be worth considering if the sums involved are especially high.
In any event we would be happy to advice you as to the precise impact of SDLT on transactions you may be contemplating. We can also help with completing SDLT returns, claiming available reliefs, advising you on payment of SDLT and negotiating with HMRC.
Inheritance tax is a grim subject, but tax planning is key
The inheritance tax is not much fun to discuss, but it is often the case that taking a few simple steps is all that is required to make sure that inheritance is kept to a minimum (and in many cases zero).
It’s not usually necessary to put complicated trusts in place. But it is a good idea to think about it whilst you still have a few miles left on the clock, since the majority of the exemptions are time based. Our tax consultants will be able to talk you through the key points and you can get a rough idea from our inheritance tax calculator.
And whilst we are on the subject, if you haven’t already done so, our legal team can help you put a Will in place. Making sure you have a Will is particularly important for company shareholders, as a court determination on ownership (and assets frozen during the probate process) can be crippling to the ongoing operations of a business.
You may be looking to invest in property and are unsure how this will affect the tax you need to pay? UK property tax can be complicated, and specialist advice should be taken to ensure that the right amount of tax is being paid. Property transactions can have a taxation implication for individuals and business, and can impact on the full range of taxes from Income and Capital Gains Tax to Inheritance Tax and VAT.
We provide services to:
Buy to let investors
• Second home owners
• Those renovating or developing property
• Those wanting advice on the latest tax changes
There may be many issues you may not have considered. It is our job to provide professional and well informed advice. For occupied properties, the difference between repairs, maintenance and improvements can be a major headache. The tax legislation in this area is highly complex, with the many interpretations being based on case law. Our experts can help you tackle this minefield head on, and avoid all the worry regarding your tax obligations.
We can also look to structure your affairs in the most tax efficient way possible, while considering the tax burdens put in place by the Government from 1 April 2013. These anti avoidance provisions are aimed at UK property which has been enveloped within a corporate structure.
Tax-efficient profit extraction
A guide to tax-efficient profit extraction for business owners.
Owning and running your business is a tough proposition but it is vitally important that people continue to do it. As well as the rewards that come from hard work and determination, there are also monetary benefits to running your own business.
There are a variety of ways in which profits can be taken out of a business, each with their own tax implications. And, of course, tax rules have a habit of changing over time so strategies that worked in the past may not be best suited to the present.
When we talk about profit, in its simplest sense we are talking about:
total revenue – total expenses = profit
This means that profit is whatever is left over once a company has paid its taxes, rent, bills, salaries and other expenses.
Although every business’ goal is to make profit, it can take a long time.
Corporation tax is levied on the profits a company makes from doing business (‘trading profits’), investing and selling certain assets for more than they were originally bought for (‘chargeable gains’).
The current rate of corporation tax is 20% but it is due to reduce:
19% in 2017/18
17% in 2020/21.
Individuals have to pay income tax on the money they make from employment or the profits they make from being self-employed. Most people are entitled to a tax-free allowance of £11,000, after which they pay the following rates:
Band Taxable income Rate
Basic rate £11,000 to £43,000 20%
Higher rate £43,001 to £150,000 40%
Additional rate Over £150,000 45%
Talk to us about your tax liability.
Strategies for profit extraction
In the whirl of trying to keep your business alive and growing, it can be hard to get round to thinking about what is the best way to take the profits out of your company. The right strategy will depend on your life goals, your current situation and the type of business that you own.
Salaries and bonuses
The most obvious way to move the profit from the company to you is by paying yourself a salary. Since you do not pay any tax on the first £11,000, you will pay 20% income tax on any salary you take that is below £43,000. If you go over that threshold your income tax liability shifts to 40%.
Employee class 1 national insurance contributions (NICs) of 12% are due on salaries above £155 a week.
Tax on salaries is deducted through PAYE.
There will also be employer class 1 NICs of 13.8% due on salaries above £156 a week. The rules regarding NICs are different for directors as they pay NICs on income over £8,060 a year (annual income rather than earnings in a particular pay period).
With bonuses the tax liability will depend on whether the payment in question is cash or non-cash. If the bonus is cash, or vouchers that can be exchanged for cash, it should be treated as earnings and be subject to PAYE and NICs. If the bonus is not cash the rules are dependent upon the kind of item it is.
Contact us to talk about tax and bonuses.
Dividends have undergone big changes in recent times. A common strategy has been to draw a salary of around £8,000 while also receiving dividends. Previously there was a 10% dividend credit that applied to extracting profits in this way.
As of 6 April 2016 the tax credit has been replaced with a £5,000 annual dividend tax allowance. Dividend income that exceeds £5,000 and the income tax personal allowance is taxed at the following rates:
basic rate: 7.5%
higher rate: 32.5%
additional rate: 38.1%.
An important distinction between salaries and dividends is that the latter can only be paid out of profits while an individual can continue to draw a salary during a loss making period.
Other points for consideration about dividends:
dividends paid within pension funds and those received in shares from ISAs are tax-free
dividend income is not included when calculating the personal savings allowance of £1,000 (£500 for higher rate taxpayers)
all tax is deducted and paid through self-assessment.
We can help you understand dividends.
Contributing into a pension can be a tax-efficient way of extracting profits from a commercial entity. The contributions that you pay will benefit from government tax relief and they are not taxed while they are invested in your pot.
Pension contributions can be paid both by an individual or by a company. They are not treated as a benefit and are therefore not liable for income tax or NICs.
There is a £40,000 limit on the amount of money that can be put into a pension each year. The annual allowance is reduced by £1 for every £2 of income for those with an income above £150,000 including pension contributions, up to a maximum reduction of £30,000.
When you access your pension pot, you can withdraw the first 25% as a tax-free lump sum. If you withdraw the rest it will be taxed at your marginal rate.
Contributing to a pension can be thought of as a tax-efficient long-term investment as unless you plan to work well into old age, you are going to need a retirement income.
Benefits in kind
Benefits in kind are the benefits that employees or directors receive through their employment but which are not included in their salary or wages.
Common types of benefits in kind are company cars, medical insurance and certain kinds of childcare arrangements.
A number benefits are tax-free, including the following:
- subsidised or free meals
- sports facilities
- work travel
- bicycles and equipment.
We can assist you with benefits in kind.
Retaining the profits
As well as extracting profits, it may also be a good strategy to keep some money within the company. The company can either hold on to the money or use it to invest in shares or property in much the same way an individual would.
If the profits from 1 time period are retained within the company they can be used for a number of potential purposes such as:
- funding bonuses or dividends in poor performing years
- as a separate retirement fund
- as to extract as a capital gain if you should decide to wind up the company (this could be very tax-efficient if the gains qualify for entrepreneurs’ relief).
Ultimately, it is likely that you will choose to utilise a number of the strategies outlined in this article to reap the financial rewards of your hard work and dedication. The important part of the process then becomes finding the right mix.
We can advise you on a strategy that works for you.
Income tax & corporation tax mitigation
Tax Mitigation Strategies
Do you like to pay tax? Well actually no one likes to pay too much tax.
We can review your personal circumstances and share how other individuals and business owners are saving tax and keeping more of their hard earnt cash.
To find out how you can reduce or eliminate your income tax, corporation tax, capital gains tax and other tax bills, then please contact us on 020 8240 7483.
The tax legislation in the UK is ridiculously complex with Finance Acts in recent taking UK tax law up to over 11,000 pages.
This means that the UK now has the most lengthy and complex tax legislation in the world.
So what does this mean to you?
Quite simply it creates many ways of saving serious amounts of tax legally.
We have teamed up with some of the leading tax experts in the UK to bring leading edge advanced tax planning strategies to you.
These strategies have the potential to save you many thousands of pounds in tax, for example:
Reducing the tax on growing businesses
For growing businesses launching something new (e.g. a new product or entering a new market) it is often possible to restructure the business in a way so that the end result is that 5-10 years of expansion profits can effectively be earned free of tax. In addition to the key benefit of reducing or completely eliminating tax bills on the expansion profit, this new structure enables businesses to reward, motivate and retain key people. Click here to request further information.
Advanced remuneration planning for companies
For companies that are looking to pay their key employees/directors in excess of £100k in discretionary bonuses (and have the cash) there are strategies that could reduce their personal income tax from over 50% to as little as 2.5% or even possibly 0%. Please note that recent announcements made surrounding Employee Benefit Trusts and EFRBS may impact many more typical strategies for tax efficient profit extraction. However, each case should always be reviewed on its individual merits. Click here to request further information.
Income tax mitigation for individuals
Traditional advanced income tax mitigation strategies for individuals have largely been legislated against in recent years. However, there are still opportunities to make personal investments into structures which have been designed to use established tax breaks to protect your capital whilst allowing you significant potential for positive returns. Click here to request further information
Reducing the cost of commercial property
Have you bought or extended commercial property at a cost of £300,000 or more in the last 10 – 15 years? Or are you thinking about it? It is often possible for a taxpayer to claw back between 20 – 40% of the costs and reclassifying them as plant and machinery. This can result in big savings… and sometimes a big cheque from HM Revenue & Customs. Click here to request further information
Reducing inheritance tax
There are a range of inheritance tax (IHT) strategies available, including advanced IHT planning that can result in even bigger savings by reducing IHT liabilities to zero. This can apply both to your own Estate, that of your parents and other family members of whom you may be a potential beneficiary.
Tax law is constantly changing and we are continually seeking new tax saving strategies and opportunities through our strategic partners. If you are faced with a large tax bill of any sort please contact us as soon as possible if you would like us to explore ways in which we may be able help you mitigate, reduce or even completely eliminate tax bills of all varieties.
Can we help you?
Please E-mail us (firstname.lastname@example.org) or telephone us on 020 8240 7483 with details of your particular circumstances and we will endeavour to create a solution to reduce your tax bills.