Practical and intelligent tax saving solutions for you and your business
Whether personal or business tax affects our everyday life and it never stands still.
In the current climate clients expect their advisers to help them make more savings each year through careful tax planning.
Shipleys have a team of knowledgeable tax and accountancy experts who constantly look at ways to add value and provide practical effective solutions whether it’s an owner-managed business or a multi-national group. Our clients know that we genuinely value their custom and ensure that they are always more than satisfied with our work and costs.
- Structuring your Business
- Property Tax
- Capital Allowances
- Inheritance Tax Planning
- Asset Protection and Preservation
- Non UK Resident Domicile & Property Holding Structures
- Tax & VAT Investigations
- VAT Planning
Structuring your Business
Did you realise that the way your business is structured could be affecting how much tax you’re paying?
Do you get the feeling that you could be paying too much tax?
Operating through the appropriate legal entity is vital but can often be neglected if a business has grown organically.
We can provide advice on the most suitable business structure – sole trader, partnership, company, limited liability partnership.
We can help you to structure your business in the most tax efficient way, saving you tax and improving the efficiency of the business.
We also have the expertise to advise on all areas of corporate structuring issues such as:
• Reorganisations and mergers
• Company Purchase of Own Shares
• Reductions in share capital
• Planning with share rights
• Group tax planning
The taxation issues can be complex, but with our expertise we can guide you through, helping you meet your commercial objectives in a tax efficient way.
One of the most common questions we hear is “how do I get my profits out of the company paying as little tax as possible?”
We work with our clients to consider the tax picture as a whole – getting an understanding of both personal and corporate, short term and long term goals.
Because we take into account the whole picture, we can ensure that when it comes to tax, you won’t miss a trick and that all avenues of tax relief are explored.
We know that working with us, through careful planning, you can extract tax from the business without facing a hefty tax bill.
We can also help you to calculate the taxation impact of extraction policies by dividend or salary/bonus; provide advice in relation to pension contributions and also have particular expertise in tax planning using different classes of share capital.
If you like the sound of working with people who have your goals and aspirations at the heart contact us now.
Shipleys are experts when it comes to property tax matters, advising you on how to arrange your property transaction in the most tax efficient manner. With effective strategies, we can significantly reduce the exposure on property transactions.
Speak to us about:
- Services for developers
- Services for investors
- Professionals working in the property sector
- Services for property agents
When you buy, lease or improve a commercial property, HMRC allows you to offset some of that expenditure for tax purposes. Your advisors have probably claimed for the more obvious features, but as capital allowance specialists we dig much deeper to make significant additional claims on your behalf.
Typically, we identify Capital Allowances of between 10% and 30% of the commercial property purchase price.
We use specialist surveyors with tax expertise, to visit your property to uncover this extra layer of allowable items. This service is relevant for two types of clients:
1. Commercial property owners and investors who can retrospectively claim for unused allowances, (going back many years in some cases), for alterations, extensions and upgrades to their buildings.
2. Buyers and sellers of commercial property who need to agree a value for plant and machinery as part of the purchase process.
Inheritance Tax Planning
IHT has been commonly described as a ‘voluntary tax’ and with good reason. It can usually be reduced with proper and often simple planning, ranging from lifetime planning, will planning or even after death variation or disclaimer can mitigate tax.
IHT planning will assist in preserving family wealth and will reduce tax bills for your heirs, With careful lifetime planning, you can even reduce your exposure to IHT whilst retaining the asset and income.
Asset Protection and Preservation
Asset Protection Essential for protecting and preserving company and family assets from third party claims, divorce, bankruptcy, spendthrift spouses, and youthful improvidence. Asset Protection has a number of forms, including:
Company Asset Protection – The valuable assets in a company, namely property, cash and brand, may in certain circumstances be protected by a restructuring exercise, using group structures, all without triggering taxes on the restructure whilst affording protection.
Family Asset/Wealth Protection – Family assets/wealth can be protected and preserved from claims, bankruptcy and divorce. Typically assets are placed into a properly constituted trust within certain limits with the result that the preservation and protection of the family assets is achieved without adverse tax consequences.
Non UK Resident Domicile & Property Holding Structures
This topic always seems to raise the most debate about the fairness of the UK tax system. And has been squeezed over the years, however if you are in the tax privileged position to be either non UK Dom or non UK Resident the tax benefits are still extra ordinarily valuable in the right circumstances, to say the least. However, this valuable status is generally under used (except by the super rich).
A key area of tax planning is on property holding structures for non UK resident and non UK domiciles individuals as properly structured solutions achieve significant tax savings.
Tax & VAT Investigations
Tax investigations by HMRC often come as an unpleasant shock to individuals or businesses and can be very stressful. Those under enquiry often feel targeted and victimised.
At Shipleys we are non-judgmental, vigorous in defending our clients and aim to resolve the investigation in the most efficient manner possible without compromising the quality of our work.
We have the experience and know how to handle local district cases to large tax fraud cases both in direct and indirect (VAT) tax.
Our VAT experts trained with HM Revenue & Customs (HMRC) and have a complete understanding not only of the legislation but of HMRC’s policies and procedures.
Our work extends to every aspect of VAT but some of the services we are most often asked to provide involve negotiation with HMRC on liability issues and agreeing partial exemption methods, providing VAT planning ideas for clients to improve cash flow, assisting clients through the maze of VAT property law, and advising them on EU and other international transactions.
Some of the areas we cover most include:
• VAT and property
• VAT and not-for-profit organisations
• VAT and offshore companies
Contact us now for a free no obligation consultation with a tax consultant.
Latest news & blogs…
WITH MANY now going through job changes and unemployment, renting out a room in your house or flat might be a great way to earn some tax-free income as well as providing an affordable space for someone else in need.
In today’s Shipleys Tax note we look at how renting a spare room in your house can earn you some tax free cash.
What is Rent-a-room relief?
The rent-a-room scheme allows those with a spare room in their home to let it out furnished and to receive rental income of £7,500 tax-free each year without the need to declare it to HMRC. Where more than one person receives the income, each can receive £3,750 tax-free. The limits are not reduced if the accommodation is let for less than 12 months.
The rent-a-room scheme can be used by anyone who lets a furnished room in their own to a lodger. They do no need to own their own home – it can also apply if they rent (but they should check with their landlord whether their lease allows this). The rent-a-room scheme can also be used by those running a guest-house or a bed-and-breakfast establishment and provide services, such as meals and cleaning, as well as accommodation.
The scheme is not available in relation to accommodation which is not in the individual’s main home or which is let unfurnished.
Where the rental receipts are £7,500 or less (or £3,750 or less where more than one person benefits from the rental income), the exemption is automatic. There is no need to tell HMRC about the rental income. Rental receipts are the rental income before deducting expenses, plus any charges made for services such as cleaning or meals.
Using the scheme where rental income exceeds the threshold
The rent-a-room scheme can also be used where the rental receipts exceeds the rent-a-room threshold (£7,500 or £3,750 as appropriate). Where this is a case, the taxable amount is simply the amount by which the rental receipts exceed the rent-a-room threshold. This approach will be beneficial if the rent-a-room threshold is more than actual expenses. However, where using actual figures will produce a loss, it is not beneficial to claim rent-a-room relief as this cannot create a loss and the benefit of the loss will be lost.
Where rental receipts are more than the rent-a-room threshold, a tax return must be completed. If the relief is to be claimed, this can be done by ticking the relevant box in the return.
The election can be made each year, depending on whether it is beneficial to do so.
Iqra lets out her spare room to a lodger for £100 a week, earning her £5,200 a year.
As the receipts are less than £7,500, she takes advantage of the automatic exemption for rent-a-room relief. She does not have to declare the income to HMRC.
Mary lets out a room in her home for £10,000 a year. She incurs expenses of £1,000 a year.
If she does not claim rent-a-room relief, she will pay tax on her profit of £9,000. However, by claiming rent-a-room relief, she is only taxed to the extent that her rental income exceeds £7,500. She is therefore able to reduce her taxable profit from £9,000 to £2,500 by claiming the relief.
If you are affected by any of the issues above and would like more information, please call 0114 272 4984 or email email@example.com.
Please note that Shipleys Tax do not give free advice by email or telephone.
IN THESE tough times company profits maybe severely affected but what if your family company is lucky to have cash in the bank? Is there a tax-efficient way to make a short term loan to directors to meet personal bills with a view to clearing the loan with a dividend payment when the business picks up? This can be a tax-efficient strategy, but there are tax pitfalls – in today’s Shipleys Tax note we briefly look at the options.
Tax implications of making loans to directors
Where a family company has cash in the bank but profits have been adversely affected by the pandemic, directors of a family company may wish to take a short term loan to enable them to meet personal bills, with a view to clearing the loan with a dividend payment when business picks up. This can be a tax-efficient strategy, although there are tax implications to be aware of if the loan balance exceeds £10,000, or if the loan is not repaid by the corporation tax due date.
A tax-free loan?
It is possible to enjoy a loan of up to £10,000 tax-free for up to 21 months. To enjoy the maximum tax –free period, the loan must be taken out on the first day of the accounting period. Where the loan is taken out during the accounting period, as long as it is does not exceed £10,000, it can be enjoyed tax-free until nine months and one day after the end of the accounting period.
Provided the loan is for £10,000 or less, there is no benefit in kind tax to pay. But if the outstanding loan balance exceeds £10,000 at any point, the director is taxed on the benefit of the loan.
The dreaded tax charge
To avoid a tax charge, the loan must be repaid within nine months and one day of the end of the accounting period. This is the day by which corporation tax for the period must be due. A section 455 tax charge (named after the legislative provision imposing it) is a charge on the company set at 32.5% of the outstanding loan balance. The charge is aligned with the higher dividend tax rate.
If the loan is cleared by the corporation tax date, there is no section 455 tax to pay. There are various ways in which the loan could be cleared, for example, by declaring a dividend (assuming that the company has sufficient retained profits) or by paying a bonus. However, there will be tax implications of these too. Unless the director can use funds from outside the company to clear the loan or will pay tax on the dividend or bonus being used to clear it at a rate which is less than 32.5%, it may be better to pay the section 455 charge instead.
The section 455 charge is a temporary charge which is repaid if the loan is repaid. The repayment is made nine months and one day from the end of the accounting period in which the loan was repaid, usually be setting it against the corporation tax liability for that period.
However, it should be noted that anti-avoidance provisions apply to prevent a director from trying to clear the loan shortly before the corporation tax due date and re-borrowing the funds shortly afterwards. What mechanisms would work to circumnavigate these provisions are beyond the scope of this tax brief.
Benefit in kind charge
Note that a tax charge will also arise on the director under the benefit in kind legislation if the loan balance exceeds £10,000 at any point in the tax year. The amount charged to tax is the difference between interest due on the loan at the official rate (currently set at 2.25% since 6 April 2020) and the interest, if any, paid by the director. The company must also pay Class 1A National Insurance (at 13.8%) on the taxable amount.
If you are affected by any of the issues above and would like more information, please call 0114 272 4984 or email firstname.lastname@example.org.
Please note that we do not give free advice by email or telephone.
LEGISLATION introduced to tackle the abuse of Research and Development (R&D) tax relief claims, which inadvertently affected genuine claims from small businesses, is being amended.
In today’s tax brief, Shipleys Tax looks at the new proposed changes to R&D rules and suggests why it’s good news for SME’s looking to get tax relief on research expenditure.
For a general overview of R&D and its abuse see: https://www.shipleystax.com/2020/09/beware-of-unscrupulous-rd-tax-relief-claim-companies/
Under the UK R&D tax credit relief rules, R&D costs incurred for work done anywhere in the world can potentially qualify for R&D tax relief. This is a very generous aspect of the tax relief but one that was open to widespread abuse.
For example, companies outside the UK with no real business interests in the UK, would set up UK companies and run foreign R&D costs through the company only to obtain the refundable/payable R&D tax credit from HMRC. HMRC state they have identified approximately £300M in fraudulent claims.
In order to prevent this abuse, draft legislation was introduced whereby any payable R&D tax credit would be capped at three times the PAYE costs incurred (thereby limiting the claim).
One of the major problems with this cap was an unintended result to deny or substantially reduce the R&D tax credit payable for certain SMEs; in particular start-ups. In many cases, start-ups tend to engage staff on a contract basis as opposed to employee/PAYE basis for various reasons. This would mean a low PAYE base cost.
As such, you could have the situation where a start-up has one employee on a reduced salary (because the company is “bootstrapping”) and hiring R&D staff on a contract basis. For example, if the PAYE were £5,000, the payroll cap would be £15,000 and hence any payable tax credit over this amount would be denied even if the qualifying expenditure was much higher. With the average SME receiving over £55K in tax credits, this could result in a substantial reduction, or denial, of R&D tax credit relief.
Under new draft legislation however, these restrictions have been lifted and there are now two exceptions to the rule above.
Firstly, any payable R&D tax credit below £20K is not affected by the cap. Secondly, and more importantly, any SME will not be subject to the cap if:
- its employees created the intellectual property behind the R&D work and
- its expenditure on externally provided workers (and work subcontracted to a related party) is less than 15% of its overall R&D spend.
Currently the legislation is draft and, if passed, is welcome news to SMEs in the UK. In particular it would benefit those startups with very low PAYE costs and hand them a cash boost when it’s needed most.
The new legislation is expected to apply to accounting periods on or after 1 April 2021.
To talk through your potential R&D claim and how our team of experts might be able to help, please call 0114 272 4984 or email email@example.com.