Company Tax planning
Company A Limited owned an asset worth a substantial amount. The asset was in a company in which the owners were involved in entrepreneurial ventures. The directors were looking to continue with their speculative business ventures yet wanted to protect the asset from the commercial risk.
Comment: Shipleys Tax undertook a group reconstruction which resulted in the asset being transferred to another entity without any immediate tax liability to the company or its shareholders.
Company X Group Limited was looking to sell off two subsidiaries to a buyer in exchange for shares. With the structure the client had in place, the sale of the two companies would have resulted in a tax liability of around £1.8 million on a paper gain and also caused the shareholders to lose favoured tax status.
Comment: Shipleys devised a group reorganisation which resulted in the two companies being sold with no immediate tax liability to the group or its shareholders.
Company Y Limited wished to reward and tie in employees. Bonus schemes were expensive and arbitrary and caused cash constraints.
Comment: Shipleys implemented a tax efficient share scheme arrangement. This achieved the client’s objectives and also gave the founder shareholders the opportunity to establish an alternative exit strategy.
Company A Limited had a very complex company structure comprising of a number of non-trading intermediate holding and parallel companies which served no particular purpose and was not a tax efficient structure. The structure had arisen as a result of a piecemeal acquisitions and shareholder changes which was administratively difficult to manage. The parallel companies were related and had numerous inter company loans which the directors wanted to make tax efficient.
Comment: Shipleys implemented a tax efficient group reorganisation and put measures into place which would enable them to take full control of their inter company loans with minimal tax consequences.
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Where a property has at some point been the owner’s only or main residence, any gain relating to the final period of ownership is exempt from capital gains tax. Prior to 6 April 2020, the final period is set at 18 months, subject to a period of 36 months where the person making the disposal is a long-term resident of a care home or is disabled.
However, for disposal on or after 6 April 2020, the final period exemption is halved from 18 to nine months. However, it remains at 36 months for disposal by long-term care home residents and disabled persons.
If you are planning to dispose of a property which has not been your only or main residence throughout the whole period that you have owned it, speak to your professional advisers to ascertain how the timing of the disposal can impact on the capital gains tax payable.
Lettings relief is a valuable relief that applies on the disposal of a property which has been let out and which has at some point been the owner’s only or main residence.
Under the current rules lettings relief applies to shelter part of the gain arising on the sale of a property which has been let out as residential accommodation and which at some time was the owner’s only or main residence. The amount of the lettings relief is the lowest of the following three amounts:
• the amount of private residence relief available on the disposal;
• £40,000; and
• the gain attributable to the letting.
However, from 6 April 2020, the availability of lettings relief is to be seriously restricted. From that date, lettings relief is only available where at some point the owner of the property lets out part of their main residence as residential accommodation and shares occupation of that residence with an individual who has no interest in the residence.
Where the gain would otherwise be chargeable to capital gains tax because it relates to the part of the main residence which is let out as residential accommodation, it is only chargeable to capital gains tax to the extent that it exceeds the lower of:
• the amount of the gain sheltered by private residence relief; and
If the property is let but the landlord does not live in the property with the tenant, lettings relief will not be available for disposals on or after 6 April 2020.
Lettings relief can shelter up to £40,000 of gains. Where a disposal of a property that would currently attract the relief is on the cards, it may be beneficial to dispose of the property prior to 6 April 2020. Speak to your professional adviser to ascertain the impact that the disposal date has on the available reliefs and the capital gains tax, if any, that will be payable.
Residential property gains
Although no capital gains tax will arise on the disposal of a property which has been the owner’s only or main residence throughout the period of ownership, a liability may arise on the disposal of a residential property which is or has at some point been a second home or which has been let.
Prior to 6 April 2020, where capital gains tax is payable on a gain arising on the disposal of a residential property, the gain is notified to HMRC on the self-assessment return and the tax is payable by 31 January after the end of the tax year in which the disposal took place.
However, from 6 April 2020, taxpayers will be required to make a payment on account of the capital gains tax liability arising on the disposal of a residential property. The taxpayer will also be required to make a return to HMRC giving notice of the disposal. The return must be delivered to HMRC within 30 days of the date of completion of the disposal. Payment of any associated tax must be made within the same window.
Capital gains tax on chargeable residential property gains is payable at higher capital gains tax rates of 18% and 28%.
If you are planning on disposing of a second home or buy-to-let property on or after 6 April 2020, speak to us about how the new return and payment rules will affect you.
Car enthusiasts would not have unnoticed the unveiling of a stunning car recently: the Porsche Taycan Turbo. And it’s an all electric beauty.
Convenient then, to look at the current tax advantages of buying an electric vehicle (the Porsche starting at a relatively modest £83,367).
So how does the company car tax rules work? In a nutshell, the lower the Co2 emissions the lower the tax “benefit” percentage, and, there are some upcoming attractive tax reliefs for all electric company cars.
For 2019/20 the appropriate percentage for cars with Co2 emissions of 50g/km or less is 16%, while the appropriate percentage for cars with CO2 emissions of 51-75g/km increases to 19%. The appropriate percentage is set at 22% for cars with emissions in the 76-94g/km band and at 23% for cars within the 95-99g/km band. Thereafter, the charge increases by 1% for each 5g/km rise in CO2 emissions until the maximum charge of 37% is reached for cars with CO2 emissions of 265g/km and above.
The diesel supplement remains at 4% for 2019/20 and applies to cars with emissions not certified to Real Driving Emissions 2 (RDE2) standards or which do not meet the Euro standard 6d (subject to not exceeding the maximum charge of 37%).
For 2019/20 the fuel multiplier is set at £24,100.
Looking ahead to 2020/21, the charge for electric and hybrid cars is to be reduced. From 6 April 2020, the appropriate percentage for zero emission cars falls to 2% and the appropriate percentage applying to cars in the 1-50g/km band will depend on the level of the car’s CO2 emissions as shown in the table below.
By choosing an electric or hybrid company car, it is possible to significantly reduce the associated tax bill from 2020/21 onwards.
Speak to us about the tax implications of your company car and how to make a tax-efficient choice telephone 0114 275 6292 or email firstname.lastname@example.org.
Following the decision of the First-tier Tribunal in two cases which involved the use of tax avoidance schemes and disguised remuneration arrangements to avoid tax and National Insurance, HMRC have published a spotlight which draws attention to why these arrangements do not work. In each case HMRC were successful. The Tribunal found that the disguised remuneration arrangements that were being promoted were notifiable under the Disclosure of Tax Avoidance Schemes (DOTAS) legislation.
The spotlight (Spotlight 52) is available on the Gov.UK website at www.gov.uk/guidance/disclousure-of-tax-avoidance-schemes-tax-avoidance-using-offshore-trusts-spotlight-52.
If you need help with this, or have been approached by anyone promoting offshore tax avoidance schemes, contact us for an authoritative review on email@example.com or telephone 0114 275 6292.