Asset Protection examples…

Asset Protection

Company Assets – Ring Fencing

Client A wished to remove a commercial property from his business as part of an asset protection planning exercise. The property was demerged away from the trading business and effectively ring fenced; this transaction was commercially driven. There was limited stamp duty exposure of 0.5% on this transaction and no other taxes.

Comment: Asset protection is fundamental consideration when entering or embarking on new ventures, it is key that the transactions to protect assets are commercial/investment driven.

Private Assets – Trusts

Client B wished to gift assets to his family members whilst retaining an element of control. The client was concerned about potential claims against the beneficiaries in the future by spouses, trustees in bankruptcy etc, therefore the gifts were made into a relevant trust which provided the desired protection.

Comment: In order to provide real protection the trust has to be properly constituted, the correct type of trust must be used and not be a sole beneficiary trust as the courts have looked through such trusts in recent cases.

Offshore and Domicile

X individual had a sizeable portfolio of residential investment properties. We restructured the tax affairs to transfer the properties into an offshore company without triggering any taxes, all with HMRC clearances (which in our mind are essential for comfort).

As the individual was non UK domiciled for inheritance tax purposes, the strategy avoid IHT on the portfolio immediately, hence saving £2.1M, whilst operationally not affecting how the business was operated.

Latest news & blogs…

IR35 & Off-Payroll Workers

Asset Protection Shipleys Tax Advisors

Recently , the IT contracting market has faced upheaval due to the upcoming changes in off-payroll workers. From 6 April 2020, the off-payroll working rules that apply where the end client is a public sector organisation are being extended to the private sector. 

The amended rules will apply where services are provided via an intermediary, such as a personal service company, to an end client which is a medium or large private sector organisation. The rules bite if, ignoring the personal service company, the worker would be classed as an employee of the end client. Prior to 6 April 2020, the personal service company had to operate the IR35 rules and work out the deemed payment. However, from 6 April 2020, responsibility for working out whether the rules apply will shift to the end client and, where they do, the fee payer must deduct tax and National Insurance from payments made to the worker’s personal service company.

Where the end client is a small private sector organisation, the existing IR 35 rules apply. A private sector organisation is not small if at least two of the following apply:

   •  turnover of more than £10.2 million; 

   •  balance sheet total of more than £5.1 million; 

   •  more than 50 employees.

To prepare for the changes, HMRC recommend that medium and large private sector companies should:

 • look at their current workforce (including those engaged through agencies and intermediaries) to identify those individuals who are supplying their services through personal service companies;

 •  determine whether the off-payroll rules will apply for any contracts that extend beyond 6 April 2020 (HMRC’s Check Employment Status for Tax (CEST) tool can be used to determine a worker’s status);

 •  start talking to contractors about whether the off-payroll rules apply to their role; and

 •  put processes in place to determine if the off-payroll working rules will apply to future engagements. These may include assigning responsibility for making a determination and determining how payments will be made to contractors who fall within the off-payroll working rules.

Workers affected by the changes should also consider whether it is worth remaining ‘off-payroll’.

If you are medium or large private sector organisation engaging workers who provide their services through an intermediary, such as a personal service company, or if you are a worker providing services via an intermediary, speak to us to understand what the changes to the off-payroll working rules mean for you.

CLASS 1A NIC ON EMPLOYEE TERMINATION PAYMENTS

Asset Protection Shipleys Tax Advisors

Class 1A National Insurance contributions are employer-only contributions charged on most taxable benefits in kind (cars, gifts, vouchers etc).

From 6 April 2020 the Class 1A charge is extended such that from that date it will apply to taxable termination payments in excess of the £30,000 tax-free limit and to sporting testimonial payments in excess of the £100,000 lifetime limit. Currently, such payments are taxable but notliable to National Insurance.

The new Class 1A charge on termination payments will apply to the extent that the termination payment exceeds the £30,000 tax-free limit. The normal Class 1A percentage of 13.8% will apply. However, unlike Class 1A National Insurance contributions on benefits in kind, any liability on termination payments will be notified to HMRC via real time information (RTI) and paid with PAYE tax and Class 1 National Insurance contributions. Termination payments in excess of the £30,000 threshold will remain free of employee’s National Insurance contributions.

As with the new Class 1A charge on taxable termination payments, the liability will be reported and paid via the PAYE/RTI process, rather than through the P11D(b) process.

Non-contractual, non-customary sporting testimonials are taxable to the extent that they exceed a £100,000 lifetime tax-free allowance. From 6 April 2020, Class 1A National Insurance contributions will also be payable to the extent the lifetime allowance is exceeded. The Class 1A charge will fall on the sporting testimonial committee and it will be the responsibility of the sporting testimonial committee to report and pay the Class 1A liability to HMRC. 

Speak to your professional adviser to understand how the timing of a termination payments will affect whether any employer-only National Insurance contributions are due.

SELF-ASSESSMENT TAX RETURN DEADLINES

Asset Protection Shipleys Tax Advisors

The deadline for filing the 2018/19 self-assessment return online is 31 January 2020. Where a notice to file a return was issued after 31 October 2019, a later deadline of three months from the date of issue of the notice to file applies.

An earlier date of 30 December 2019 applies to taxpayers who have a liability of £3,000 or less which they would like to pay via an adjustment to their tax code.

A late filing penalty is charged if the return is filed late, even if it is only late by one day and regardless of whether any tax is due.

Speak to us to ensure that you understand what information you need to provide by when to ensure that the filing deadline is not missed.

Any tax that is unpaid for 2018/19 must be paid by 31 January 2020. The first payment on account for the 2019/20 tax year is due by the same date. Payments on account must be made where the previous year’s liability was £1,000 or more unless 80% of your tax liability is deducted at source, such as under PAYE. Each payment on account is 50% of the previous tax year’s tax and Class 4 National Insurance liability. The second payment on account for 2019/20 must be paid by 31 July 2020.

If you would like to us to check what needs to be paid by when speak to us.

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