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tax issues

Talking Tax – consider these tax issues

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This is not tax advice, nor a comprehensive view of all tax issues, but in considering the tax issues relating to your business and insuring you keep out of the way of an HMRC tax investigation there are numerous tax reliefs and incentives available and a selection of these follows below.

Naturally these will depend on your own particular circumstances and it is vital that your advisor provides proactive, positive advice.

Identifying the most Suitable Structure from a Tax Perspective

This might be trading as a sole trader, a partnership or a limited company. The tax liabilities vary accordingly as do the running costs. If in doubt, you can start as a sole trader and incorporate later in your business’ development.

What is Tax Deductible?

The basic rule is any expense incurred wholly and exclusively for the benefit of the business.  Always try and obtain and retain the supporting evidence.

Claiming Capital Allowances

Some expenditure will be of a capital nature, e.g. furniture, fixtures and fittings and these may be eligible for 100% relief.

Cars

The allowances for cars has just recently changed in the last budget and is restricted but low Co2 emissions may still qualify for up to 100% relief.

Research & Development (R&D)

Basically, the claim must be of something “different” not necessary innovative or technologically advanced which will then enable extra tax relief or even a refund!

VAT Yes or No?vat tax issues

It is not compulsory to register for VAT at the outset of the business. Only when your turnover reaches the current (at the time) level over a twelve-month period, does it become mandatory to register for VAT.

However, if your customers are most likely to be VAT registered then there will be a cash flow benefit in requesting a voluntary registration which will enable tax to be recovered. There are various different schemes in place depending on your industry or circumstances and you should consult your advisor on the best one for you.

Other Potential Allowable Items

If you are carrying out any work from home then a proportion of household expenditure often covered by a suitable round sum allowance can be claimed.

If other members of your family are assisting in the business then it may advantageous to pay them a salary.

Incentives for Investors

If your business structure is a limited company and you are seeking investors, then they should consider the attractive incentives through SEIS and EIS.

Like everything else there are conditions to meet but these schemes are very popular.

National Insurance Credit

A relatively new incentive is the credit of £3,000 per annum against National Insurance incurred for employees, which can include the owners.

Conclusion

The above is not exhaustive and changes to the legislation occur in the regular bi-annual budgets but hopefully for the start-up the above ideas offer you an incentive to your way forward. If you would like more information on the above or any other tax issues do not hesitate to contact me via this link >>>

save tax

Ten Ways to Legitimately Save Tax in 2017/18

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The opportunities to save tax have just become even more complicated, so much so that even the Inland Revenue Software cannot cope with all the changes!

That having been said, it is actually possible to save tax on income of over £32,000 in certain circumstances as the example at the end will show.

Apart from the personal allowance of £11,500 there are a variety of other opportunities to consider.

1) Dividend Allowance

A reminder that the tax-free amount remains at £5000 pa for each shareholder which encourages the use of a company.

2) Starting Rate of Savings

This is a further £5000 on savings income that effectively brings the tax free amount up to £16,500 with the personal allowance. However, one would need earnings, rental income or similar of little more than £11,500 as the £5000 is only available on the next £5000 above the £11,500

3) Savings Allowance

This is a further £1000 relating to savings income over and above the personal allowance and savings allowance above. It is restricted if the total income exceeds the higher rate threshold.

4) Rent a Room

This if for owner occupiers who take in a lodger and receive up to £7,500 p.a.

5) Trading Allowance

This relates to small amounts of trading income up to £1000

6) Rental Allowance

As for 5 above but re rents as opposed to trading.

7) Transferable Tax Allowances

A spouse or civil partner can elect to sacrifice 10% of his or hers tax free allowance (e.g. £1150) if doing so doesn’t take them out of the basic tax band

8) Capital Gains Tax Exemption

With a rising stock market it may be worth utilising the annual exemption of £11,300

9) ‘Old’ Married Couples Allowance

One spouse needs to have been born before 6th April 1935

10) Enterprise Investment Scheme and Seed Enterprise Investment Scheme

An investment if suitable into an EIS or a SEIS can reduce income tax by 30% and 50% respectively as well as deferring a capital gain.

Example to Save Tax

State Pension £125 per week                                                                                      9,100
Private Pension £200 per month                                                                              2,400
Sub Total                                                                                                                       11,500 

Bank Interest                                                                                                                 6,000 (2 & 3 above)

Dividend Interest                                                                                                          5,000 ( 1 above)
Sub Total                                                                                                                       22,500

Rent a Room                                                                                                                  7,500 (4 above)

Access Past Home                                                                                                         1,000 (6 above)

Casual Work                                                                                                                   1,000 (5 above)

Total Possible Savings                                                                                               32,000

So Mr Tax Efficient received £32,000 and paid NO Tax!

NB. If no 7 is relevant the saving could be more!

save tax helpIf you want to save tax then contact me by clicking here >>>

tax investigations

HMRC Tax Investigations – Outline and Recent Developments

By | Accountants in Hertfordshire, Accountants in Herts | No Comments

Tax Investigations from HMRC (Her Majesty’s Revenue & Customs) raised over £26 billion in 2015 and HMRC have now increased their resources devoted to this area.

Types of Enquiries

An enquiry can be either a straight forward question about one or two points or more detailed tax investigations.

HMRC enquiries have two objectives:

  1.  To seek to detect errors and areas in which the principles may be open to different interpretation (this is the most obvious).
  2.  To test the system of recording income accurately which is particularly pertinent in a cash business (this is less obvious).

More serious Enquiries may be dealt with under HMRC’s “Code of Practice 8” that you will understand if you are in that situation.

It is the full enquiry where specialist advice is required. Most accountants offer fee protection insurance to cover their costs in this area.

What Happens and Reasons for Tax Investigations

tax investigations ukIt is important to note that an aspect enquiry into certain specific issues can develop into a full enquiry so even here great care must be taken.

The vast majority of enquiries begin because an HMRC Officer suspects that there is something wrong with the taxpayer’s return. In other words there is either something on the face of the return itself or that HMRC have received information suggesting an error.

Random enquiries are relatively unusual. However, it is dangerous to assume that an enquiry has started on a random basis notwithstanding the Accountant who helped make the return may not be able to identify a just cause.

Handling an Enquiry

Tax investigations’ process is laid down in the law but HMRC will generally override this with their own style. Thus, an experienced practitioner can determine what information must be disclosed. However, ultimately there could be a question of penalties where the issue of co-operation will be a major factor, assuming, of course, that the conclusion results in additional tax being due.

Most Important Issues

It is often forgotten that although the enquiry or tax investigation is into a particular year, the result can be used as a basis for detecting any possible problems that might be seen in previous years.

The potential outcome of any enquiry is therefore difficult to determine at the outset. Nonetheless, one expects the specialist tax consultant that handles the communications to provide some comfort to the taxpayer being investigated.

I have dealt with numerous tax enquiries over the years and will be happy to discuss any preliminary points on a “no obligation basis” for any unfortunate taxpayer that has received a detailed letter from HMRC.

Howard F Weintrob FCA CTA DipPFS has been a tax partner at several leading firms and now has his own consulting practice – Redwoods Accountancy Services Ltd that you can contact here >>>