FOR MANY in the UK, the tax and accounting landscape is seen as overly complicated and ever-changing, making it vital to choose a tax adviser who can effectively navigate this terrain.

In todays’ Shipleys Tax blog we look at the Top Five Reasons why selecting the right tax adviser is crucial for your overall financial health.

Does paying more save more? Let’s find out.

1. Tax Optimisation: Maximise Tax Savings

The UK tax code is a labyrinth of potential savings, but only a proficient tax adviser can unlock these opportunities. They can identify hidden deductions, credits, and exemptions tailored to your financial situation. An inexperienced adviser, on the other hand, may overlook these nuances, resulting in unnecessarily high tax liabilities. For instance, failing to utilise even simple tax reliefs such as Entrepreneur’s Relief or R&D Tax Credits can significantly inflate your tax bill.

2. Asset Protection: Safeguarding Your Wealth

Whether it’s real estate, business assets, or investments like gold and cryptocurrencies, the right tax adviser can help investors protect their wealth. They can devise strategies to shield these assets from creditors, legal disputes, and unexpected personal circumstances. They understand UK-specific legal structures and practices, like the use of LLPs, trusts or limited companies, which can effectively safeguard your wealth. However, an adviser with less experience or understanding of the UK market might lack the in-depth knowledge of these asset protection strategies, potentially leaving your assets vulnerable to financial risks.

For landlords and overseas investors in the UK property market, strategising asset protection through effective tax planning is a critical part of investment management. A seasoned tax adviser can provide invaluable guidance on utilising the UK’s tax legislation to your advantage. They can help design strategies such as setting up tax efficient structures for buy-to-let or development properties or making optimal use of tax reliefs which reduce tax exposure to taxes such VAT, SDLT, CGT or ATED. These tax planning strategies can minimise your tax liabilities and shield your investments from undue exposure. On the other hand, less experienced advisers might not have the breadth of knowledge to leverage these tax benefits effectively, which could result in higher tax payments and potential erosion of your investment returns.

3. Staying Ahead in the Crypto Game: Cryptocurrency Taxation Expertise

The new frontier of cryptocurrencies brings with it complex tax implications. A savvy tax adviser stays abreast of these changes, enabling you to comply with the law while maximising the benefits of your crypto investments. In contrast, an inexperienced adviser might not fully understand the intricacies of cryptocurrency taxation, potentially leading to compliance issues or overpayment of taxes.

4. Enhancing Stakeholder Confidence

Your financial statements are more than just numbers; they’re a reflection of your financial health and business acumen. A top-tier tax adviser will ensure your accounts are accurate, transparent, and compliant, enhancing the confidence of stakeholders like banks, HMRC, and potential buyers. In contrast, financial statements prepared by less experienced advisers may raise questions about their accuracy and reliability, potentially impacting your relationships with these crucial stakeholders.

In contrast, financial statements prepared by less experienced advisers may raise questions about their accuracy and reliability, which can have significant implications. For instance, banks may become hesitant in extending credit or approving loans if they perceive inconsistencies or inaccuracies in your financial statements. HMRC might increase scrutiny on your tax filings, possibly triggering audits and investigations. Potential buyers or investors may question the viability of your business based on these financial statements, which could affect your business’s valuation and sale prospects. Even your business partners and employees might lose confidence in the management and financial stability of the business. In essence, less precise and trustworthy financial statements can ripple through all aspects of your business, potentially affecting your reputation, financial stability, and growth opportunities.

5. Long-term Wealth Management: Planning for the Future

Effective wealth management and retirement planning require foresight and expertise. The right tax adviser can guide you towards tax-efficient investment strategies that will maximise your wealth in the long run. On the other hand, an adviser with less experience may lack the insight to effectively manage your long-term wealth, which could impact your financial comfort in retirement.

In conclusion, the importance of choosing the right tax adviser cannot be overstated. Far too often, individuals and businesses fall into the trap of seeking advice only when a problem arises, missing out on valuable opportunities for proactive financial planning and strategy.

Some may opt for inexperienced or less qualified advisers in an attempt to save costs, overlooking the fact that expert advice is an investment in itself. Like any good investment, a competent adviser can generate a healthy return in the form of tax savings, improved financial management, increased stakeholder confidence, and secured long-term wealth.

Others may hesitate to invest in high-quality advice, failing to understand that the costs of inadequate or incorrect advice can far outweigh the fees of a top-tier adviser. The risks range from missed tax savings and audit risks to reduced stakeholder confidence and compromised asset protection.

If you are affected by any of the issues above and would like more information, please call 0114 272 4984 or email info@shipleystax.com.

Please note that Shipleys Tax do not give free advice by email or telephone.

From the Shipleys Tax Team!

Eid ul Adha

Eid ul-Adha is the latter of the two Islamic holidays (the first being Eid ul Fitr) celebrated worldwide each year. It honours the willingness of Ibrahim (Abraham) to sacrifice his son Ismail (Ishmael) as an act of obedience to God’s command. At the point Ibrahim was to sacrifice his son, however, God provided a lamb to sacrifice instead.

Who Celebrates Eid ul-Adha in the UK?

With nearly 2.8 million Muslims living in the United Kingdom, which equals about 4.8% of the population, Islam constitutes the second largest religion in the country, after Christianity.

How is Eid ul-Adha celebrated in the UK?

On Eid ul-Adha, Muslims in the UK usually start the day by performing ghusl, a full-body purification ritual. They then dress in their finest outfits and attend a prayer service at an outdoor prayer ground or the local mosque. Afterward, it is customary to embrace and wish each other Eid Mubarak, which translates as “have a blessed Eid,” give gifts to children, and visit friends and relatives.

One of the central rituals on Eid al-Adha is “Qurbani”, the act of sacrificing a sheep, goat, or cow. The meat is then divided between family, friends, and the poor. Other Muslims give money to charity to give poorer families the chance to have a proper Eid feast.

Eid ul-Adha has a celebratory character, and the day may be rounded off by visiting funfairs or festivals held for the occasion in some British cities.

Eid ul-Adha Food

In contrast to Eid ul-Fitr, which is nicknamed the “Sweet Eid” for its variety of sweet dishes, Eid ul-Adha is often called the “Salty Eid” because the feast includes mainly savoury food.

Popular dishes include Kebab (boneless cooked meat), Haleem (a stew usually made from meat, wheat, and lentils), and Biryani (a spicy meat and rice dish originally from India). The meal is usually rounded off by a sweet dessert, featuring cakes, biscuits, or sweet pastries like Turkish baklava.

The Hajj – and its connection with Eid ul Adha

Muslims celebrate Eid ul-Adha on the last day of the Hajj. The Hajj is pilgrimage to Makkah in Saudi Arabia. It occurs every year and is the Fifth Pillar of Islam (and therefore very important).

All Muslims who are fit and able to travel should make the visit to Makkah at least once in their lives.

During the Hajj the pilgrims perform acts of worship and renew their faith and sense of purpose in the world.

This year it was reported around 2.5 million Muslims from all over the world visited Makkah for Hajj.

The Ka’bah

The Ka’bah (black cube) is the most important monument in Islam. Pilgrims walk around the Ka’bah seven times and many of them try to touch the Black Stone (deemed to be a stone from heaven) located at the corner. Contrary to popular belief, muslims do not worship the Ka’bah, nor does it actually house God, it is a symbol of faith and unity. The Kaba is the direction of their prayer, not the object of it. This misconception stems from the fact that Muslims are seen bowing and prostrating in front of the Kaba in pictures. 

IN A RECENT tax spotlight report, HM Revenue and Customs (HMRC) has highlighted a supposed school fees tax planning scheme that has gained popularity among owner managed companies. HMRC suggests in this report that the particular scheme, which aims to fund education fees through dividend diversion to their minor children, does not work as the arrangements are caught by specific anti-avoidance legislation (https://www.gov.uk/guidance/dividend-diversion-scheme-used-to-fund-education-fees-spotlight-62).

In today’s Shipleys Tax brief, we look at school fees tax planning in light of HMRC report above and ask: is there still room for sensible school fees planning?

HMRC suggests that the particular scheme, which aims to fund education fees through dividend diversion to their minor children, does not work…

In a nutshell

In the report HMRC explain the arrangement involves a company issuing a new class of shares, which are then bought by a relative of the company owner for a sum considerably below market value. These shares are gifted to a trust for the company owner’s children. The trust then receives substantial dividend payments, which are taxed at a much lower rate due to the children’s personal tax-free allowance, dividend allowances, and basic tax rate eligibility.

However, HMRC state that this scheme is ineffective as it contravenes specific anti-avoidance legislation covering similar arrangements aiming to provide certain tax advantages. HMRC has strongly advised anyone involved in such schemes to withdraw from them and settle their tax affairs.

Those who have implemented such schemes now face the daunting task of untangling their financial affairs, rectifying their tax compliance status, and potentially confronting substantial HMRC penalties. This scenario underlines the complexity and risks inherent in engaging with such tax avoidance strategies.

So, school fees planning is dead?

Not quite.

Legitimate tax planning, which encompasses school fee planning, is still very much a viable and acceptable practice. This holds true as long as the planning is carried out in a non-artificial or non-abusive manner. Like all forms of tax planning, school fee planning should be grounded in genuine financial activity.

Those who have implemented such schemes now face the daunting task of untangling their financial affairs, rectifying their tax compliance status, and potentially confronting substantial HMRC penalties.

It is essential to understand that while attempting to optimise tax liabilities is acceptable, artificial or abusive arrangements is where the problem begins. As long as there is a genuine financial activity underpinning these plans, and not just contrived setups designed solely for tax avoidance, they are likely to be accepted by HMRC.

Next Steps

If you are involved in any school fee tax scheme you should take immediate professional advice which may include:

• cease, desist and withdraw from making any further distributions to fund school fees

• settling tax affairs which make include making unprompted disclosures to HMRC as this should mitigate the penalty position

• unwinding any structures/trusts, however, one will need to be alive to the tax consequences of doing so

• updating the trust register with HMRC, if applicable.

Future of School Fees Planning

Could there be situations where affluent families, non-parent family members, or relatives can genuinely transfer income-producing assets without falling foul of the anti-avoidance rules?

In short, yes – but with conditions.

In cases where families or relatives genuinely aim to fund a child’s education (excluding parents of minor children), there are still sensible and legitimate strategies which can mitigate taxes whilst steering away from the contrived and artificial arrangements which may be caught.

Also, one should note that the gifting of assets can lead to tax liabilities, exposing the donor to capital gains tax and inheritance tax. As such, it is prudent to seek professional tax advice before entering any planning.

In cases where families or relatives genuinely aim to fund a child’s education (excluding parents of minor children), there are still sensible and legitimate strategies which can mitigate taxes…

Final Words

When done ethically and transparently, sensible school fee tax planning can be effective for those aiming to support a child’s education. However, it is imperative to steer clear of artificial arrangements which carry considerable financial repercussions.

Always consult with a reputable tax adviser before making any decisions about school fees tax planning.

At Shipleys Tax, our tax planning strategies are always designed to be sensible, practical and transparent, giving you peace of mind that your tax affairs are fully compliant with all relevant legislation.

If you are affected by any of the issues above and would like more information, please call 0114 272 4984 or email info@shipleystax.com.

Please note that Shipleys Tax do not give free advice by email or telephone.