By Katie Tax Advice • Tax News • Wealth Planning 0 Comments

Possible changes to capital taxes

Possible changes to capital taxes:

The Office of Tax Simplification (OTS) have been asked by the Treasury to review both Inheritance Tax (IHT) and Capital Gains Tax (CGT) recently which again suggests there could be changes to those taxes that may require pre-emptive planning action.

WILL CGT RATES GO UP?

The OTS report highlighted the mismatch between CGT and income tax rates which currently encourages taxpayers to prefer to take profits as capital rather than income. This potential opportunity has been addressed recently in the case of company liquidations where there is now a targeted anti-avoidance rule. There has also been increased scrutiny of share for share exchanges and company share buy backs by HMRC. Both of these transactions, if properly structured, can currently be taxed as capital gains instead of income.

The CGT annual exempt amount is currently £12,300 which is considered a very generous de minimis. It is important that taxpayers do not need to report trivial disposals of capital assets but perhaps we will need to get used to a more modest limit going forward. Consider making use of the current generous limit whilst it is still there.

A possible change that has featured in a couple of OTS reports recently concerns the treatment of property passing on death. Although the value of the property is subject to IHT, there is currently no CGT and also a tax free uplift to market value for CGT purposes.

The OTS recommendation is that the value for CGT purposes should be the deceased person’s base cost. Although there would still be no CGT to pay on death, the reduced base cost would mean a larger gain and CGT liability on subsequent sale.

We are hoping that the current business asset disposal relief that provides business owners with a 10% CGT rate on disposals will continue to apply as this encourages entrepreneurs to build successful businesses.

POSSIBLE INHERITANCE TAX CHANGES

As reported in an earlier newsletter, the OTS suggested simplifying IHT on lifetime gifts including reducing the period of potential exemption from 7 to 5 years. Such a change would mean that the donor would only be required to survive for 5 years following a gift for the transfer to be exempt from IHT.

The OTS also suggested that the conditions for Business Property Relief might be tightened up by aligning the rules with the definition of a trading company for CGT. This relief currently provides 100% relief on the transfer of shares in an unquoted company. The suggested change would mean that more transfers of shares would potentially be liable to inheritance tax and may require a careful review of your plans if you are looking to pass on your business.

Need more information?

Do you need help with capital taxes? We offer a wide range of services which are unique to your business and our team of chartered accountants have a wealth of experience in a broad range of sectors. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

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    By Katie Business News • Tax Advice • Tax News • Wealth Planning 0 Comments

    Rishi Sunak’s Budget day is 3 March 2021

    There has been a lot of speculation on what will be in Rishi Sunak’s second Budget in early March and whether there is any tax planning that you should consider before then.

    The government will have to start paying down the massive £2 trillion of borrowings at some stage. Increasing tax rates would send the wrong message when the government is trying to stimulate economic recovery.

    What the Chancellor is more likely to do is abolish or restrict some of the generous tax reliefs that we have got used to taking advantage of. That would have the effect of raising tax revenue without increasing headline rates.

    Although likely to be unpopular with Conservative party voters and backbenchers, it is possible that the Chancellor will target pension tax relief and capital taxes in his Budget. The changes may well be announced as a “simplification” of the rules but that often hides tax raising measures in the small print!

    Those buying property might also want to speed up those transactions if they can as the beneficial stamp duty land tax rates are scheduled increase from 1 April 2021.

    Listen out in the Budget as the chancellor might possibly announce an extension of the SDLT relief to support the property sector for a few more months.

    Another bit of good news to listen out for would be yet further extensions in the CJRS furlough and SEISS grant schemes. These grant schemes are currently scheduled to end on 30 April and it would be nice to get a bit more notice this time

    Need more information?

    If you need help with anything from the budget, please get in touch with us. We offer a wide range of services which are unique to your business. Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

    Our fantastic team at A&C Chartered Accountants are here to help.

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      By Katie Business Advice • Business News • Wealth Planning 0 Comments

      Delivering effective training to your team remotely

      Providing training for your team when they are working remotely can be challenging.

      Delivering a training session to a room full of people can be difficult enough. Engaging with your audience remotely presents a whole new challenge.

      The first thing to think about is the delivery method.  Your firm may already have a webinar or conference platform in place. If not, there are lots of good options available such as Zoom, Microsoft Teams or Skype. Ideally you will want to use a platform that allows you to screen share, instant message and share files.

      Getting people to attend training sessions when they are busy and working remotely can be a challenge. Creating a training schedule and sharing it well in advance can help.

      Provide sufficient notice, explain the benefits of the training session and people will tend to prioritise attending your sessions.

      Ideally you should record your session giving anyone who can’t make it the option to view the training session at a convenient time.

      Remote employees will want to begin their training by knowing what the process will look like and what the expectations are, so outline a schedule reflecting the aims of the training and the overall principles it will explore – but save from going into the detail of the course itself.

      Your training is only as successful as your pre-planning allows it to be, so make sure you invest the time before the training is rolled out. It’s also a good opportunity to troubleshoot any problems before they have a chance to arise, whether that’s to do with the platform you’re using, screen sharing, testing that any video content works, or having a test run through the learning content itself.

      Keep your training session interesting by including videos, polls and asking questions which stimulate dialogue among your audience. The more discussion you can encourage, the more immersive the training session will be. Provide post-training materials that your attendees can refer back to.

      The idea of post-training is to provide remote employees with the tools to refresh what they learned or build on it in their own time.  Post-training should include some resources that help people to implement what they learned – short videos, infographics and ‘how-to’ guides can be a helpful way of revisiting the training content.

      Need more information?

      We offer a wide range of services which are unique to your business and we understand the importance of remote working. We also offer all training to clients remotely including Xero and Sage training. Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

      Our fantastic team at A&C Chartered Accountants are here to help.

      Contact us below

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        By Katie Business Advice • Tax Advice • Wealth Planning 0 Comments

        New years resolution to save tax with pension planning

        At this time of year we think about New Year’s resolutions and pension planning could be a great way. It is also a good time to start planning your tax affairs before the end of the tax year on 5th April.

        An obvious tax planning point would be to maximise your ISA allowances for the 2020/21 tax year (currently £20,000 each).

        You might also want to consider increasing your pension savings before 5 April 2021 as the unused annual pension allowance is lost after three years.

        For those looking to do some inheritance tax planning, it would be a good time to review (or make) your Will.

        Pension planning

        For most taxpayers the maximum pension contribution is £40,000 each tax year, although this depends on their earnings. This limit covers both contributions by the individual and by their employer.

        Note that the unused allowance for a particular tax year may be carried forward for three years and can be added to the relief for the current, but then lapses if unused.

        Hence the unused pension allowance for 2017/18 will lapse on 5 April 2021 if unused.

        Note that there are rumours that pension tax relief may be restricted in the next Budget. Under the current rules, the net after tax cost of saving £4,000 in a personal pension for a higher rate taxpayer is £3,000. HMRC then add a further £1,000 to your contribution and there is a further £1,000 relief when your tax liability is calculated, thus the value of your pension pot would be £5,000, for a net cost of £3,000. Remember that pension fund investments can go down as well as up, but a 40% fall would be unlikely.

        Need more information?

        We offer a wide range of services which are unique to your business and can assist with pension planning. Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

        Our fantastic team at A&C Chartered Accountants are here to help.

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          By Katie Tax Advice • Tax News • Wealth Planning 0 Comments

          Year end Capital Gains Tax planning

          Capital Gains Tax

          Have you used your 2019/20 £12,000 annual capital gains exemption? Consider selling shares where the gain is less than £12,000 before 6 April 2020.

          Also, if you have any worthless shares consider a negligible value claim to establish a capital loss. You may even be able to set off that capital loss against your income under certain circumstances which could save tax of up to 45% of the loss.

          What is Capital Gains Tax?

          It is a tax on any profit you made on the disposal of an asset and it applies to most assets when they’re sold. However, There are some exceptions, for example, you don’t pay Capital Gains Tax when you sell your car, unless you use it for business. Other exemptions include your main place of residence if you own your home, and personal possessions sold for £6,000 or under. Also, you won’t have to pay Capital Gains Tax, if you inherit an asset. You will only need to pay CGT when you sell it.

          Capital Gains Tax also applies to assets received as gifts from other people. A valuation needs to be made of how much the asset is valued at when gifted, and if a capital gain arises when you dispose of the asset, tax is applied. There is tax relief available for gifts, so please speak with an accountant for more advice.

          Need more information?

          We offer a wide range of services for businesses who need guidance on Capital Gains Tax. Our team of chartered accountants have a wealth of experience in a broad range of sectors. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

          Our fantastic team at A&C Chartered Accountants are here to help.

          Contact us below

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            By Katie Business Advice • Tax Advice • Tax News • Wealth Planning 0 Comments

            University tax planning guide for Parents

            It is that time of year again when parents are sending their children off to university. There’s a lot to consider and parents may of course wish to support their children financially, where possible.

            Parents who run their own companies may consider making grown up children shareholders in order to take advantage of the £2,000 dividend allowance and their children’s lower rate tax bands. The dividend allowance reduced to £2,000 from £5,000 from April 2018.

            Many university students like to preserve a bedroom at home. From 6 April 2016 rent-a-room relief is £7,500 per annum.

            For example:

            Peter is 18 and starting university in September. He will have to pay tuition fees of £9,000 per year, his rent at halls of residence is £8,000 per year and he is budgeting for food and other bills of £100 per week.

            If his parents decide to fully support his rent and other bills (leaving him with a student loan to cover his tuition fees), their son could cost them £13,200 per year.

            Peter’s parents own their own company.

            • They re-arrange their share capital.
            • They gift Peter shares in the company, up to the value of their CGT annual exemption, they could alternatively claim hold-over relief.
            • The parents also make an agreement to charge Peter rent for her room at home of £7,500 per year.
            • The board of director’s declares annual dividends to Peter of £20,700 in order to cover his university costs and home rent.

            The arrangement means that Peter will pay tax at 7.5% on her dividends in excess of his £2,000 dividend allowance (or £5,000 allowance prior to April 2018) and any available personal allowance.

            This arrangement potentially saves a higher tax-rate-paying shareholding parent £8,170 in tax per annum (based on 2019/20 figures). Their rental income from their son is effectively tax-free drawings from their company. The alternative is not to rent a room to Peter and to sub-let his room in term time.

            Children under 18

            This arrangement will not work with minor children as the settlement anti-avoidance provisions apply where parents gift shares to minor children.

            Need more information?

            We offer a wide range of services which are unique to any business. We have a wealth of experience in all sectors between our team, from restaurants, fashion brands, fitness centres and many creatives start their business correctly and ensure they are staying tax compliant. The team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

            Our fantastic team at A&C Chartered Accountants are here to help.

            Contact us below

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