Practical and intelligent tax saving solutions for you and your business

Tax Solutions

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.

Sections


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
• 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, 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.


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 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.


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…

Tax Tip – mortgage payment holidays for landlords

Tax Solutions Shipleys Tax Advisors

As lockdown slowly eases across the UK, we look at some of the practical issues faced by individuals already impacted by COVID-19. One issue we are being asked about is the impact of buy-to-let landlords who have decided to take a mortgage payment holiday. We outline the impact of this and how this can affect your tax payment for the year.

In March, the Government announced that homeowners struggling to pay their mortgages due to Coronavirus would be able to take a three-month mortgage payment holiday. They confirmed that this option would also be available to buy-to-let landlords, who may suffer cashflow difficulties if, as a result of the virus, their tenants were unable to meet their rent in full when it is due. In May, the Government announced that those struggling to pay their mortgages because of the impact of Coronavirus would be able to extent their mortgage payment holiday by up to three months.

… interest continues to accrue during the period of the mortgage holiday, although the landlord will not be required to make any payments during this time.

Where a landlord opts to take a mortgage payment holiday, what impact does this have on tax relief for interest payments and, in turn, their tax payments?

Interest continues to accrue

The first point to note is that interest continues to accrue during the period of the mortgage holiday, although the landlord will not be required to make any payments during this time. This is important and will impact on the timing of the associated interest relief, which will depend on whether accounts are prepared on a cash basis or on the accruals basis.

At the end of the holiday, the missed payments and interest may be recovered by extending the term of the mortgage or by making higher payments once payments restart.

Relief as a basic rate tax reduction

From 2020/21 onwards, tax relief for finance costs (such as mortgage interest) on residential properties is given only as a tax reduction at the basic rate. This means that 20% of the allowable finance costs are deducted from the tax that is due.

As expenditure under the cash basis is recognised when paid, if the landlord does not make a payment, there will be no relief for that expense until the payment is made.

Impact of a mortgage holiday – Cash basis

Most landlords whose rental receipts are £150,000 a year or less will prepare the accounts for their property rental business under the cash basis. As expenditure under the cash basis is recognised when paid, if the landlord does not make a payment, there will be no relief for that expense until the payment is made.

Where the landlord takes a mortgage, no interest will be paid during the period of that holiday. As a result, a landlord may pay less in interest in 2020/21 than in 2019/20. The interest rate reduction is calculated by reference to the interest paid in the year.

Example

Ali has a buy-to-let property on which he has buy-to-let mortgage, the interest on is £500 per month. As a result of the Covid-19 pandemic, his tenant struggles to pay his rent on time. Ali takes a three-month mortgage payment holiday. The mortgage term is effectively extended as a result.

Under the accruals basis relief is given for the period in which the expense arises rather than when payment is made.

In 2020/21, Ali only makes nine mortgage payments instead of the usual 12, paying interest of £4,500 rather than £6,000. The tax reduction for 2020/21 is £900 (£4,500 @ 20%) rather than £1,200 (£6,000 @ 20%).

Tax reduction – accruals basis

Under the accruals basis relief is given for the period in which the expense arises rather than when payment is made. As interest continues to accrue throughout a mortgage holiday, the landlord will be able to claim the full tax reduction on the interest accruing in the 2020/21 tax year, even if the interest was not paid in full in the year because the landlord took advantage of a mortgage payment holiday.

So if, in the above example, Ali prepared his accounts for 2020/21 on an accruals basis, he would be able to claim a tax reduction of £1,200, whereas under the cash basis his deduction will only £900, the higher deduction will of course reduce any rental profits (or increase a loss) subject to tax and thereby reduce any tax payable in the year.

If you need advice regarding your rental properties please call us on 0114 272 4984 or email info@shipleystax.com.

Lettings Relief let go – major tax changes on selling your home

Tax Solutions Shipleys Tax Advisors

Under the dreadful cloud of COVID-19 some major tax changes are seemingly going under the radar. One such change is lettings relief, a previously valuable tax break available to those selling their home which was rented out at some stage. This tax mitigation opportunity has now been abolished and has been replaced with a much less attractive tax break which severely restricts the circumstances in which relief is available. We explain the changes here.

Lettings relief provided additional relief for tax where a property that has been occupied as a main residence is let out. For disposals prior to 6 April 2020, a substantial tax relief was available where a property was let as long as that property had at some time been the owner’s only or main residence.

However, availability of the relief is now seriously curtailed in relation to disposals on or after 6 April 2020. Under the new rules, lettings relief will only be available where the homeowner and their tenant are in occupation of the property at the same time – shared occupation. So from 6 April 2020, relief is only available where the owner shares the property with the tenant, a move which seriously narrows any claim that could have been made under the previous rules.

Under the new rules, lettings relief will only be available where the homeowner and their tenant are in occupation of the property at the same time – shared occupation. So from 6 April 2020, relief is only available where the owner shares the property with the tenant…

The new-style (narrow) relief

For disposals on or after 6 April 2020, the new lettings relief is available where:

  • part of the property is the individual’s only or main residence and
  • another part of that property is let out by the individual, otherwise than in the course of a trade or a business.

The gain relating to the let part is only chargeable to capital gains tax to the extent that it exceeds the lesser of:

  • the amount of private residence relief; and
  • £40,000.

Spouses and civil partners can take advantage of the no gain/no loss rules to transfer the property or a share in it to each other without a loss of lettings relief. Where lettings relief would be available to a transferring spouse or civil partner for the period prior to the transfer, it remains available to the recipient.

Example

Let’s look at how this works in a real life scenario.

Idris brought a three-bedroom house in 2015. He lived in the property for five years until it was sold in May 2020, realising a gain of £90,000. Throughout the time that he lived in the property, he let out two rooms. The let rooms comprised one-third of the property by floor area.

Two-third of the property was occupied as Henry’s main residence, and thus two-thirds of the gain qualifies for private residence relief. This equates to £60,000 (2/3 x £90,000). The remaining gain of £30,000 is attributable to “letting”.

As Idris occupied the property with the tenants, he can claim lettings relief. Previously, Idris would have been able to claim the relief irrespective of whether he lived with the tenants at the same time.

Thus, in Idris’ example, the gain attributable to the letting is only chargeable to capital gains tax if, and to the extent, that it is greater than the lower of:

  • 60,000 (the amount of the private residence relief); and
  • £40,000.

As the gain attributable to the letting is less than £40,000, lettings relief is available to shelter the full amount of the gain. As such no capital gains tax arises.

Although in this example the entire gain is free from tax, the circumstances in which the relief can be claimed is much narrower than before and will definitely bring more people into the tax net.

In addition, the requirement for shared occupation will apply not only to future lettings but also any let periods before 6 April 2020.

Although in this example the entire gain is free from tax, the circumstances in which the relief can be claimed is much narrower than before and will definitely bring more people into the tax net.

This means that people who have let properties after they moved out will lose the relief that they would have been entitled to for those letting periods. In effect, the change is retroactive and, as such, will have a massive impact on unwary homeowners.

This change to how selling your home is taxed is harsh, both because of the retroactive impact and because of the sudden impact of the change. There are no transitional measures are in place and, considering letting relief has been around for 40 years, this has been criticised by tax advisory sector.

If you need tax advice in selling your home please call us on 0114 272 4984 or email info@shipleystax.com.

Deferring your self-assessment tax: is it a good idea?

Tax Solutions Shipleys Tax Advisors

Most businesses have suffered due to the COVID-19 pandemic, but should you take the option to defer your tax payment on account to 31 January 2021? We weigh up the option below.

To help those suffering cashflow difficulties as a result of the Covid-19 pandemic, the Government have announced that self-assessment taxpayers can delay making their second payment on account for 2019/20. The payment would normally due by 31 July 2020.

Under self-assessment, a taxpayer is required to make payments on account of their tax and Class 4 National Insurance liability where their bill for the previous tax year is £1,000 or more, unless at least 80% of their tax liability for the year is deducted at source, such as under PAYE. Each payment on account is 50% of the previous year’s tax and Class 4 National Insurance liability. The payments are made on 31 January in the tax year and 31 July after the end of the tax year. If any further tax is due, this must be paid by 31 January after the end of the tax year. In the event that the payments on account are more than the final liability for the year, the excess is set against the tax due for the next tax year or refunded.

To help those suffering cashflow difficulties as a result of the Covid-19 pandemic, the Government have announced that self-assessment taxpayers can delay making their second payment on account for 2019/20. The payment would normally due by 31 July 2020.

The normal payment dates for payments on account for the 2019/20 tax year are 31 January 2020 and 31 July 2020, with any balance due by 31 January 2021.

Delay not cancellation

The thing to note is that the option on offer is a deferral option not a cancellation. Where this is taken up, the payment on account must be paid by 31 January 2021. As long as payment is made by this date, no interest or penalties will be charged.

Should I pay if I can?

The deferral option is clearly advantageous to those who have taken a financial hit during the Covid-19 pandemic, particularly those operating in sectors where working is not possible during the lockdown, such as hairdressers and beauticians and those operating in the hospitality, leisure and retail sectors.

For those who have not taken a financial hit or who are otherwise able to pay, from a cashflow perspective it may be attractive to defer the payment. However, this may simply be a case of delaying the pain; not only will the delayed payment on account be due on 31 January 2021 together with any Class 2 National Insurance liability, but also the first payment on account for 2020/21. This may amount to a sizeable bill and as such it may be better to spread the payments rather than be faced a lump sum on 31 January 2021.

However, this may simply be a case of delaying the pain; not only will the delayed payment on account be due on 31 January 2021 together with any Class 2 National Insurance liability, but also the first payment on account for 2020/21.

The decision as to whether to pay or defer is a personal one; but the option to choose is a welcome one. We recommend you aim to work out your 2019/20 tax liability early and have a discussion with your accountant as to the best course of action. At the same time, looking further forward and doing an estimated calculation of your potential tax liability for 2020/21 (COVID-19 tax year) will help identify any planning opportunities.

If you would like help deciding whether to defer or not please call us on 0114 272 4984 or email at info@shipleystax.com.

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