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Wealth Management & Protection

Asset Protection is essential for protecting and preserving company and family assets from third party claims, divorce, bankruptcy, spendthrift spouses, and youthful improvidence.

Taking the most appropriate action for the protection of your own personal assets is a very complex undertaking, requiring specialist taxation and legal assistance. Asset protection must be commercially driven and cannot be used to avoid paying creditors.

Whilst asset protection is fundamental in considering estate planning, the principle can be extended to other circumstances as well. Two common areas in brief:

PROTECTING AN INDIVIDUAL’S ASSETS

Generally, one of the most efficient ways you can protect assets is by transferring them into a relevant and properly constituted trust. The asset should then be protected against the bankruptcy or divorce of the beneficiaries.

Pitfalls

Firstly, setting up a trust for asset protection will in itself not afford any protection under insolvency or matrimonial laws for beneficiaries if the wrong type of trust is used. We have seen many trusts set up for this purpose that have failed. If one tries to rely on an improperly constituted trust for asset protection the courts may look through it and seek to set it aside.

Secondly, a point which regularly tends to be overlooked (particularly regarding property) on transfer is the mortgage against the property. If the mortgage is more than the original “base” cost of the property (perhaps due to remortgaging) then Capital Gains Tax may be liable if the mortgage is transferred into the trust. Furthermore, such transfer may potentially trigger a Stamp Duty Land Tax charge.

Many think that an outright gift of assets directly to children, siblings, etc will automatically afford protection against divorce or bankruptcy. This may not be the case and is a potentially dangerous presumption to rely on, specialist professional advice should be sought to achieve the desired results. Also such transfers tend to trigger a Capital Gains Tax charge under the deemed disposal rules and again this is often overlooked with significant tax consequences.

Company Property

Businesses may wish to protect vulnerable property and assets against commercial and business risks. Broadly speaking, one way this could be achieved would be by creating a group of companies and transferring the property into this group. The effect of this would be to “ring-fence” the vulnerable asset against any claims of the individual trade in the group.

Pitfalls
It is essential that any asset transfers is done correctly to avoid the property being “linked” to the original business, as this will afford no protection. Of equal importance is that any debts between the group companies would need to be dealt with correctly to provide any real protection.

In all cases there needs to be a legitimate business, commercial or investment driver for the transaction. Furthermore, it is crucial that any such restructuring does not fall foul of insolvency legislation, namely the defrauding of creditors.

Asset protection is an invaluable planning tool which can be used to protect, preserve and devolve family wealth in the right circumstances.

For further information on how you can effectively safeguard you assets and wealth please contact us.

Latest news & blogs…

Company Cars – huge tax benefits for electric cars from April 2020

 

 

 

 

 

 

 

 

 

 

 

Buying a car through a company

As good accountants know, buying a car through a company is usually not the most tax efficient.

This is because the company car tax regime taxes both the employee and the employer company on the provision of a company car and the way car tax is calculated. The amount of tax payable is based on the ‘car benefit’ assumed to have been provided, this is calculated by reference to the List Price multiplied by a % based on the CO2 emissions of the car. But as the value of the car depreciates, the car tax benefit remains the same as the calculation is based on the List Price not “market value”, hence the tax payable remains constant and not representative of actual value.

New car benefit rates

However, things are set to get better for the long suffering company motorist. From April 2020, there will be a sharp reduction in the car benefit rates for ‘Ultra Low Emissions Vehicles (ULEV) i.e. electric company cars with CO2 emissions of less than 75g/km. This taxable car benefit rate will reduce from 9% (2018) to 2% in April 2020.

Example:

Jaguar I-Pace EV400; List price £63,440; CO2 emissions 0g/km.

Taxable benefit:

  • 13% (2018-19)
  • 16% (2019-20)
  • 2% (2020-21)

Based on the above the car tax benefit charge will drop from £8,247 to £1269, a massive £6,978 saving!

So what now…

Well given that the new ULEV company car tax regime is set to become much more tax efficient from April 2020, you may want to consider deferring any new car purchase until April 2020, or at least choose a ULEV car which will then benefit from the much reduced car benefit rates applying from April 2020.

If you have any queries about this or any other tax planning, please contact us on 0114 275 62 92 or email info@shipleystax.com.

 The advice above is a general guide only and does not constitute advice. You must seek professional advice before taking any action.

Are You Ready For Making Tax Digital?

Businesses in the UK now have less than nine months to prepare for wide-ranging new rules requiring them to manage their accounts and submit tax returns digitally.

The government’s long-anticipated and controversial Making Tax Digital regime, hailed as the biggest tax and accounts shake-up in a generation, finally comes into effect in April 2019.

Experts in the accountancy world have warned the changes could catch many businesses off-guard. Shipleys Tax have urged business owners to begin researching and investing in digital reporting software that’s compliant with the new rules.

What is Making Tax Digital (MTD)?

Making Tax Digital for VAT is being brought in by the government as an attempt to streamline and simplify the tax reporting system. Making Tax Digital for business (MTDfb) begins on 1 April 2019 with MTD for VAT. From that date, VAT-registered businesses above the threshold of £85k (currently) will have to keep digital records and submit VAT returns using compatible software.

 There will be specific rules for how business will report digitally and the software used to do this has to comply with HMRC’s guidance. Gone are paper records and spreadsheets (to a certain extent), in its place will be digital books and records stored online in the cloud.

This may come as a culture shock for many small businesses who are used to doing it the traditional way.

Businesses that exceed or expect to exceed the VAT registration threshold will need to consider:

·      are they exempt from the requirement to file returns electronically under MTD (charities, local authorities, government departments and overseas businesses will not be exempt from MTD for VAT)?

·      what records will need to be kept digitally

·      what the digital VAT account should look like

·      how to submit their digital VAT return in line with MTD requirements

·      whether to submit their digital VAT account to HMRC

·      penalties for late filing and payment of VAT, and for not keeping digital records or having digital links.

It is also worth noting that the government has plans to roll out MTD requirements for all other taxes in 2020.

What are the key dates to look out for?

·      April 2018 – HMRC opened pilot for businesses to volunteer to submit their VAT returns

·      Spring 2018 – HMRC launches consultation on MTD for corporation tax

·      1 April 2019 – start of first VAT period where MTD is mandatory

·      7 June 2019 – submission deadline for first monthly VAT returns under MTD

·      7 August 2019 – submission for first quarterly returns under MTD

·      1 April 2020 – MTD mandatory for all taxes (planned)

What can you do now to get ready for MTD?

Reports suggest some businesses have not heard about MTD. There is less than 12 months to go until MTD is implemented, many are still uncertain about the requirements and how specifically these requirements will apply to their business.

HMRC is still publishing further guidance on specific definitions and how MTD will work in practice. However, what businesses can do now is to review existing VAT accounting systems and processes in relation to the preparation of VAT returns.

Our recommended steps

To ensure that your business is ready for MTD, we would recommend the following steps:

1.    Review your internal reporting systems, processes and controls. Liaise with your advisers/software providers and internal IT teams to get a view on what they can do to help to get ready for MTD.

2.     Consider likely costs and potential disruptions to your business. Agree additional budgets for changing and maintaining your systems, seeking specialist advice.

3.     Test the integrity of your data and consider whether your VAT-related data is accurate, current and complete.

4.     Consider what information you wish to submit to HMRC and how the API connection will work. Do you need to develop or acquire additional software? Is it easier to outsource the submission of VAT returns to a third party?

Accounts and IT system changes may take 9 to 12 months to review and implement. HMRC advise that failure to meet the necessary MTD requirements could result in penalties although there will be a 12 month grace period (‘soft landing’) after MTD goes live to enable businesses to ensure that they have the necessary processes in place and digital links. It is important therefore that all affected businesses start reviewing their systems, processes and VAT adjustments now.

If you have any queries regarding the above, please contatct us on 0114 275 6292

Giving shares in the family company

 

small-business-optimised

In most small family trading companies it is not unusual for the husband and wife to own all the shares. Where a family member works in the business they may wish to give them shares in the company as recognition for their input and hard work.

However, giving shares isn’t as easy as it sounds. There are various taxes that need to be considered on a gift of shares to a family member, including income tax, capital gains tax, inheritance tax and stamp duty.

If an employee of a company receives “free” shares, for example, or if you make a gift of shares to a family member who works in the business, an income tax charge could arise on the market value of the shares gifted. If, however, it can be demonstrated that the transfer of shares is for reasons of family or personal relations, the income tax charge may be avoided.

A gift of shares to a family member is also a deemed to be a disposal of shares for capital gains tax purposes.   As the gift is being made to a connected party, it is a deemed disposal at market value. In the case of a gifts it is typical that the person making the disposal receives no monies out of which to pay any capital gains tax which may arise (the gift is treated as a sale at market value). This could discourage family members from making gifts as part of any family tax planning mitigation exercise.

Therefore, capital gains tax is potentially payable on any gain arising even though no consideration is paid. However, providing certain conditions are met, it may be possible to reduce the capital gain on the shares gifted to Nil by way of gift relief. This allows the capital gain (and thus any tax liability) which is deemed to arise on gift of the shares at market value to be postponed. It does this by effectively transferring the capital gain to the recipient of the gift. To claim this relief appropriate submissions must be made to HMRC at the right time.

Stamp duty is also normally payable on the issue or sale of shares and is payable by the person receiving or acquiring the shares.   However, if the shares are gifted and no consideration is paid, a stamp duty gift exemption relief can be claimed which is likely to reduce the stamp duty costs to nil.

For inheritance tax (IHT) purposes, a gift of shares to a family member would constitute what is known as a lifetime transfer. Based on current legislation, if you survive 7 years from the date of the gift, there should be no inheritance tax consequences on the transfer of shares to the family member. In the event of your death within 7 years of the gift, IHT relief may be available on the transfer providing certain conditions are met. This could also reduce any potential exposure to inheritance tax to Nil.

Before any transfer of shares takes place, we would recommend that you seek professional advice to ensure that the available reliefs are applicable to your particular circumstances and also to ensure that the various conditions for each tax relief are fulfilled.

The advice above is a general guide only and does not constitute advice. You must seek professional advice before taking any action. 

For more information please contact us on 0114 275 6292 or info@shipleystax.com.

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