Practical and intelligent tax saving solutions for you and your business
Tax Solutions
Business or personal, tax affects our lives and never stands still
In the ever-evolving landscape of the UK tax system, staying abreast of changes is crucial, whether you’re a small business owner, a entrepreneur, or a large corporation planning for your financial future. From deciphering complex regulations to finding opportunities for savings, the implications of not getting it right can be costly. As your trusted UK tax advisers, we bring clarity, ensuring you’re well-equipped to navigate the tax rules confidently.
Shipleys Tax have a team of knowledgeable tax and accountancy experts who constantly look at ways to add value and provide effective tax solutions whether you’re an owner-managed business or a large national group. Our clients appreciate our genuine commitment to their needs, consistently finding value in our services and expertise.
Sections
- 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
Most people know that the way their business is structured could affect how much tax you pay. What they don’t usually know is how to get the best advice on this.
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 have the expertise to advise on all areas of personal tax planning and corporate structuring issues including:
• Reorganisations and mergers
• De-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 and help you meet your commercial objectives in the most tax efficient way.
How do I get my profits out of the company paying as little tax as possible?
A common question with many solutions. Which is why 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 is crucial in developing a road map to successfully optimising your tax affairs.
Taking a holistic approach, we can ensure that when it comes to tax, you won’t miss a trick and that all avenues of tax relief are explored.
Working with us through careful planning, you can expect to extract profits from a 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 value your needs and have your goals and aspirations at the heart contact us now.
Property Tax
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
Capital Allowances
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 this topic has been caused much controversy over the over the years. Certainly, if you are in the somewhat tax privileged position to be either non UK Domiciled or non-UK Resident, the tax benefits are still extraordinarily valuable in the right circumstances, to say the least. However, this valuable status is generally under used – except by the super rich and famous.
A key area of tax planning is property holding structures for non-UK resident and non-UK domiciled individuals, properly structured solutions achieve significant UK 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.
VAT Planning
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…
HMRC’s New Dividend Non-Disclosure Campaign
HMRC HAVE ADVISED that they have commenced a “One to Many” letter campaign directed at shareholders who they suspect may need to declare income from dividends (and/or distributions).
Unfortunately, this typical “wide net” approach from HMRC means that many individuals, perhaps including vulnerable ones, will receive HMRC letters which could be misinterpreted as an accusation of tax avoidance. If you have receive a letter, don’t panic.
In today’s Shipleys Tax brief we look at what you need to know about HMRC’s One to Many letter campaign and how to respond effectively to avoid escalation.
What is HMRC’s One to Many Letter?
The HMRC has initiated a campaign targeting taxpayers who may not have declared income from distributions or dividends. Using data from company year-end accounts, which show significant drops in profit and loss account reserves, HMRC is pinpointing individuals who might have received a distribution or dividend but not declared it on their self assessment tax return.
HMRC… have commenced a “One to Many” letter campaign directed at shareholders who they suspect may need to declare income from dividends
The letter provides a 30-day window for recipients to either declare any undeclared income or to inform HMRC that all income has been accounted for. Ignoring the letter could lead to a compliance check and potential penalties.
Why You Might Have Received The Letter
HMRC’s usual method involves analysing publicly available company accounts to spot decreases in reserves and other factors, which could indicate dividend payments. However, this typically broad approach doesn’t account for dividends payments which may not be chargeable, e.g. they fall within personal and dividend allowances and are tax-free or issues relating to timing. Accordingly, if you’ve received such a letter, it may simply be part of this blanket strategy to ensure tax compliance but it’s best not to ignore it.
How to Respond to the Letter
If You Have Declared Everything:
- Contact HMRC using the details provided in the letter.
- Confirm that all necessary declarations have been made.
If You Need to Make a Declaration:
- Review your tax return and determine if there’s any undeclared dividend income.
- Visit the HMRC’s GOV.UK link on making a disclosure and use the specific online disclosure facility.
The Implications of Not Responding
Failing to respond to the HMRC’s letter can result in a compliance check and possibly higher penalties if undeclared income is discovered. It’s crucial to take action within the specified 30-day period stated in the letter. If they believe that they have no income to declare, the letter asks them to let HMRC know either by telephone or by email, again within 30 days. If they do not respond, the letter says that HMRC may open a compliance check and charge higher penalties.
Conclusion
The One to Many letter from HMRC is part of a proactive approach to tax compliance. If you’ve received one, take a moment to review your finances and speak to your adviser. With the right response, you can quickly resolve any issues or confirm your compliance, ensuring peace of mind and maintaining good standing with HMRC.
For further assistance or queries, please contact us by phone or email.
Please note that Shipleys Tax do not give free advice by email or telephone. The content of this article is for general guidance only and should not be considered as tax or professional advice. Always consult with a qualified professional before taking action.
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The ABC of Tax Planning with Alphabet Shares
THE USE OF so-called Alphabet shares has been a staple in the world of tax planning for some time. These types of shares generally allow for a flexible approach to how dividends are paid out to shareholders of a company, enabling a tailored distribution that can be adjusted according to the individual tax circumstances of the shareholders.
In today’s Shipleys Tax brief, we will cover the basic concept of Alphabet shares, their benefits and drawbacks, and the likely approach adopted by HMRC to their use.
What are Alphabet shares?
Alphabet shares are so named because they categorize shares into different classes, each denoted by a letter of the alphabet (e.g., Class A shares, Class B shares, etc.). This classification allows companies to assign different rights to each class, particularly concerning dividend payments. The flexibility in dividend allocation means that shareholders can be paid varying amounts, which can be adjusted to optimise their personal tax positions.
What are they used for?
Historically, Alphabet shares have been used as a popular method for family-run businesses to manage internal dynamics and tax liabilities. Families could allocate different dividend rights to members based on their involvement in the business or their financial needs, without altering the overall control or structure of the company.
They have also been employed in start-ups and growing businesses looking to reward key employees with a stake in the company without immediately giving away voting rights or an equal share in the distribution of profits. By issuing different classes of shares to employees, businesses could align staff interests with the company’s performance without giving away significant control.
Families could allocate different dividend rights to members based on their involvement in the business or their financial needs, without altering the overall control or structure of the company.
In corporate fundraising they provided a means to attract investment by offering variable dividend rights while retaining management control. This aspect is particularly attractive to small and medium-sized enterprises (SMEs) that are keen on securing capital but wary of outside influence over business decisions.
This flexibility makes Alphabet shares a valuable instrument for companies to structure their equity in a way that satisfied a multitude of shareholder requirements.
Tax Planning and Tailoring to Specific Needs
For certain commercial transactions, tax planning with Alphabet shares can be particularly useful in the right circumstances. Generally, you would find the following potential benefits:
– Minimise personal tax liability: shareholders can receive dividends up to the higher-rate tax threshold, effectively reducing their income tax liability.
– Utilise allowances and rates: shareholders can make full use of their dividend allowance and lower tax bands.
Minimise personal tax liability: shareholders can receive dividends up to the higher-rate tax threshold, effectively reducing their income tax liability.
– Planning for succession: Different classes can be allocated to future generations for long-term planning, without disrupting the current control of the company.
– Family estate planning: Alphabet shares can help in assigning income to family members in lower tax brackets where circumstances allow.
Not all a bed of roses…
While Alphabet shares offer flexibility as seen above, they come with a rack of potential drawbacks that can complicate their use.
– Administrative Burden: maintaining different classes of shares requires meticulous record-keeping and administrative oversight. Each class may have its own dividend schedules, voting rights, and restrictions, which must be managed and documented appropriately.
– Legal Challenges: alphabet shares can sometimes lead to legal challenges, especially if shareholders feel their rights are being impinged upon. Disputes may arise over the interpretation of rights attached to various classes, or if there are allegations of unfair treatment among shareholders.
– Corporate Governance: having multiple share classes can complicate corporate governance. The differing rights and privileges can lead to conflicts of interest and make decision-making processes more complex.
What sayeth the Taxman?
HMRC views Alphabet shares with a healthy degree of suspicion because they can be used to artificially manipulate income streams for tax advantages. One specific piece of anti-avoidance legislation (“the settlements legislation”) can apply if HMRC believes that Alphabet shares are being used to divert income to someone else and reduce tax liability.
In the context of family businesses, the use of Alphabet shares for estate planning must be done with caution. HMRC may challenge arrangements that appear to be designed to avoid inheritance tax, particularly if shares are rapidly transferred between family members in a way that seems to be timed to minimise tax liability for example.
HMRC views Alphabet shares with a healthy degree of suspicion because they can be used to artificially manipulate income streams for tax advantages.
As such, if not structured correctly, the arrangements can be easily challenged under these anti-avoidance regulations, leading to the tax advantages being negated, tax investigations and potential penalties.
Conclusion
Alphabet shares can be a useful tool for tax planning when used correctly. They allow for a high degree of flexibility and can be tailored to meet the specific needs of both the company and its shareholders. However, their use must be considered carefully, with a clear understanding of the potential pitfalls and the close scrutiny they attract from HMRC. As always, when considering the use of Alphabet shares, it is prudent to seek professional advice to ensure that they are implemented effectively.
For further assistance or queries, please call 0114 272 4984 or email info@shipleystax.com.
Please note that Shipleys Tax do not give free advice by email or telephone. The content of this article is for general guidance only and should not be considered as tax or professional advice. Always consult with a qualified professional before taking any action.
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Taxman Targets Online Sellers
WITH THE GROWING popularity of online selling platforms like TikTok and Etsy, HMRC has increased attention on the tax implications for those earning income from these sources.
In today’s Shipleys Tax note we briefly look at what’s happening and what you should do avoid falling foul of these new tax measures.
What’s the deal?
From the 1st of January 2024, digital marketplaces such as eBay, Vinted, Airbnb, and Etsy, have been mandated to gather and report details of seller transactions and income to HMRC. These platforms have until January 2025 to report sellers’ income from the previous year. This measure is part of a broader initiative to ensure tax compliance and to capture undeclared income from individuals who trade with the intention of making a profit but fail to report their earnings correctly.
The targeted platforms include:
- eBay
- Vinted
- Airbnb
- Etsy
- TikTok
From the 1st of January 2024, digital marketplaces such as eBay, Vinted, Airbnb, and Etsy, have been mandated to gather and report details of seller transactions and income to HMRC.
These platforms will need to collect and report the following information:
- Seller Details: Identification of the sellers.
- Transaction Details: Information on the transactions made by the sellers.
- Income Information: The income generated by the sellers through these platforms.
This measure is part of the UK’s implementation of the OECD rules to improve international cooperation and tax compliance.
While there’s been talk in the media of a new ‘side hustle’ tax, it’s important to clarify that no new taxes have been introduced. However, understanding the existing tax laws and how they apply to online selling is crucial.
What should you do?
As an online seller in the face of HMRC’s focus on side hustles, it’s important to take proactive steps to ensure you’re on the right side of tax laws. Below we have summarised the key issues you need to consider.
Are you Trading or Hobby-ing?
First and foremost, determine whether your online selling activities constitute a hobby or a trade. This is tricky at best and HMRC considers several factors to make this distinction. These include the frequency of transactions, profit motive, nature of the goods, and sale method. Regular sales of new or self-made items with the intent of profit are typically considered trading, whereas selling personal, used items occasionally is generally seen as a hobby. For online sellers, understanding these nuances is critical to accurately ascertain tax obligations.
Trading Allowance
One key aspect is the trading allowance, which allows individuals to earn up to £1,000 annually from self-employment, including online selling, without the need to declare this income to HMRC. This is particularly beneficial for small-scale traders or those starting out. However, it’s vital to note that once your income surpasses this threshold, the entire amount becomes reportable.
First and foremost, determine whether your online selling activities constitute a hobby or a trade. This is tricky at best and HMRC considers several factors to make this distinction
For those earning profits exceeding £1,000 from online selling, income tax and National Insurance contributions may be applicable. These profits must be reported via a self-assessment tax return, even if no tax is due, such as when profits fall below the personal allowance (currently £12,570. This rule also applies if you are using online selling as a secondary income source, with the £1,000 limit still relevant.
If you have already received income over the £1,000 allowance, or if you have received a ‘nudge’ letter from HMRC indicating you may have undeclared income, take immediate action. Do not ignore these letters; they are a prompt for you to review your tax situation.
Record it
Maintain good records of all your online selling activities, including receipts, listings, and correspondence. This documentation will be invaluable for completing your tax return accurately. If your online selling is a side hustle in addition to your main job, remember that different rules might apply, especially if your main income already exceeds your personal allowance.
Consider the use of digital tools and accounting software that can assist in tracking your earnings and expenses, making the process of reporting to HMRC more straightforward.
Information Sharing by Online Platforms
It’s also important to be aware that online selling platforms may share information with HMRC, including seller identities, transaction volumes, and values. This increased transparency aims to ensure tax compliance and makes accurate self-reporting by sellers more important than ever.
Maintain good records of all your online selling activities, including receipts, listings, and correspondence. This documentation will be invaluable for completing your tax return accurately.
Conclusion
If you’re unsure about your tax position or obligations, consult with a tax professional. A tax expert can provide clarity on your individual circumstances, help you understand your tax liabilities, and ensure you’re taking advantage of any allowable deductions or exemptions. This step is not just about compliance; it’s also about optimizing your tax situation.
For further assistance or queries, please call 0114 272 4984 or email info@shipleystax.com.
Please note that Shipleys Tax do not give free advice by email or telephone. The content of this article is for general guidance only and should not be considered as tax or professional advice. Always consult with a qualified professional before taking action.
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