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Category: Income Tax

  • Coronavirus Grants 2.0 – Finding Your Exit – Small Businesses

    Apart from using the same £2,500 monthly maximum, the two schemes are very different with the self employed now compensated for a maximum of 6 months and employees a maximum of 8 months. This perhaps reflects the fact that the self employed can work as much as possible, but employees cannot work at all or, more likely, the government would prefer employers to take more time to make decisions about redundancies.

    What do I need to know?

    Self Employed (SEISS)

    The current version SEISS 1.0 closes on 13 July 2020 with the new version SEISS 2.0 opening in August 2020.

    The maximum drops from £2,500 per month to £2,187.50 per month, rounded up to a 3 month lump sum of £6,570 being 70% of £3,125 or your average profits, as currently calculated, if lower.

    You can claim both grants or only one: SEISS 2.0 is NOT dependent on claiming SEISS 1.0.

    Presumably if you were adversely affected early on, say in April, where your profits dropped in April, but they have since picked up, you can’t claim SEISS 2.0, but this isn’t yet clear.

    Coronavirus Job Retention Scheme (CJRS)

    June – carries on as now, except any employee who needs to be in a claim from July, must be in a claim in June. With the 3 week minimum, this is an effective last date for newly furloughed employees of 10 June. All claims for June (and presumably earlier) must be made by 31 July.

    July – carries on as now, except employers can choose not to claim for any hours/days employees work paying them their full pay as before the crisis.  

    This could be beneficial for shareholder-directors who may be able to generate good profit for their limited companies in a couple of days but pay themselves only their usual small salary.

    August – as July, except employers must pay any employer’s national insurance (NI) and pension contributions on furloughed pay.

    September – as August, except the government grant to the employer is 70% of pay up to a maximum of 70% of £3,125 = £2,187.50 adjusted for any hours/days worked.

    October – as September, except 70% is now 60%, being a maximum 60% of £3,125 = £1,875 adjusted for any hours/days worked.

    What are the figures for shareholder-directors who can’t work?

    Taking the typical reference salary of £719, the £575.20 current furlough claim will change as follows:

    • June £575.20
    • July £575.20
    • August £575.20 (no NI or pension)
    • September £503.30
    • October £431.40

    Unfortunately, a dividend replacement scheme for shareholder-directors wasn’t announced, with the Chancellor reminding us to use other measures such as business bounceback loans, VAT deferral and income tax deferral. HMRC is also being helpful where companies ask to defer corporation tax under general time to pay provisions.

    Further details on both schemes will be available on 12 June. In the meantime, businesses are still working their way through this, looking for their way out.

    Please ask your usual On The Spot contact for further assistance.

  • Coronavirus – Limited Companies – What Are Your Choices?

    Now we’ve probably heard all the major Coronavirus announcements from the Chancellor, what choices do Director-Shareholder Limited Companies have to help them through this crisis? We provide a checklist below with signposting to the relevant part of gov.uk.

    Time To Pay

    Applicable to all companies and all taxes, you can call HMRC and agree a scheduled delay to paying your taxes. Have a realistic proposal that you can stick to. Signpost: https://www.gov.uk/government/news/tax-helpline-to-support-businesses-affected-by-coronavirus-covid-19

    Time To File

    Companies house will allow you to send in your accounts 3 months later than normal, a increase from the usual 9 months to 12 months, as long as you ask before the 9 month deadline.

    This may help if you’re finding it hard to get your figures prepared, but we would urge all companies to keep their figures and accounts up to date to help them keep on top of their finances particularly cashflow. Signpost: https://www.gov.uk/guidance/apply-for-more-time-to-file-your-companys-accounts#coronavirus-covid-19

    Corporation Tax

    Using an existing, normal rule, remember that if you make a trading loss during your current year end, you can carry it back 12 months and generate a corporation tax refund from the tax you paid in your previous accounting year.  Your loss may be increased by making a higher home office claim, due to working from home more often than usual.

    Business Interruption Loan

    Applicable to all companies, you may borrow from your current bank or another in the scheme, interest free and fee free for 12 months without providing any security up to £250k. If your company should be viable for the long term, this must be worth a look as a flexible option. Signpost: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils-2/for-businesses-and-advisors/

    Director Personal Income Tax Payments Deferral

    You may be due to pay income tax on your dividends on 31 July 2020 on account for the 2019/20 tax year. HMRC will not charge interest if this isn’t paid on 31 July, as long as it’s paid by 31 January 2021, the next income tax payment date. Again, this is designed to provide some immediate breathing space, but will need to be paid 6 months later along with any other income tax due by 31 January 2021. Signpost: https://www.businesssupport.gov.uk/deferral-of-self-assessment-payment/

    If your dividends are less than expected for this tax year to 5 April 2020, it should be worth sending in your income tax return as soon as possible after 6 April to generate an income tax refund from your January 2020 payment on account.

    Director Personal Mortgage Or Rent Deferral

    To help your personal cashflow further, reducing the need to rely fully on your company’s finances, you may ask your mortgage company or landlord for a mortgage or rent deferral for 3 months. This will need paying back in due course, so be confident this is something you should be able to manage.  

    If your personal finances are very stretched you may want to claim state benefits which can also help with housing costs, if you’re eligible.

    VAT Deferral

    If your company is VAT registered, you won’t have to pay any VAT due between 20 March and 30 June 2020. This covers VAT quarters ended 29 February, 31 March, 30 April and possibly 31 May.

    If you pay by direct debit, remember to cancel your direct debit in good time, and then reinstate it afterwards. HMRC won’t ask for any explanation, charge interest or penalties as long as you repay this VAT by 31 March 2021. This may provide good breathing space for the next couple of months, but do have a plan to refund it before 31 March 2021. Signpost: https://www.gov.uk/guidance/deferral-of-vat-payments-due-to-coronavirus-covid-19 

    Your VAT returns are due as normal, refunds will be paid as usual and VAT due outside of this period remains due. 

    Job Retention Scheme

    If you have employees whose jobs are at risk due to a downturn in your business, you can keep them on the books by labelling them as ‘furloughed’ employees for a minimum of 3 weeks at a time for a maximum of the three months March, April and May. They cannot do any work at all for you during the period they are furloughed.

    You need to pay your staff and operate PAYE on either full pay or 80% of their pay. The government will refund you, starting at the end of April, 80% of their pay, up to £2,500 per month, plus the associated national insurance and 3% auto-enrolment pension contribution if the employee is enrolled. Sign post: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

    We are still waiting to hear whether owner-directors can ‘furlough’ themselves where their business is on hold but they need to continue to carry out statutory duties such as preparing VAT returns or filing annual returns. If such a director was on a salary of £719 per month, this should mean a maximum refund of £1,725. [EDIT: It has been confirmed that owner-directors can furlough themselves, as long as they don’t work on the business and confine themselves to statutory duties. This is easy to demonstrate for freelancers and consultants who have no contracts at all or if a high street retailer has closed and isn’t carrying out any alternative business activity. The company through the Board of directors needs to make this decision and record it in the minutes of the meeting.]

    Separate to this, if your employees are off work due to being ill from the Coronavirus you can reclaim their sick pay for up to 2 weeks. This is also available to you as a director. Signpost: https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses#support-for-businesses-who-are-paying-sick-pay-to-employees

    Business Rates

    If you pay business rates, your company may be entitled to receive a £10k or £25k grant, which we assume will be taxable as for most other grants. 

    A £10k grant is available to any business which receives small business grant relief (SBRR) Signpost: https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses#support-for-businesses-that-pay-little-or-no-business-rates

    If you’re in the retail, hospitality or leisure sectors, you’ll pay no business rates from 6 April 2020 to 5 April 2021. If your rateable value is up to £15k, you’ll receive a grant of £10k, or if it’s between £15k and £51k a grant of £25k. Signpost: https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses#support-for-retail-hospitality-and-leisure-businesses-that-pay-business-rates 

    You don’t need to take any action because your local authority will contact you.

    In summary, please take appropriate advice to ensure you optimise your company’s particular situation. We’re in a fast moving situation and HMRC might amend its guidance without any signposting at all! 

    Stay well.

     

  • Coronavirus – A New World! – Grants For Sole Traders

    The Chancellor today announced probably his final major finance coronavirus package.

    The self employed find themselves in a new world requiring state support when they need very little in normal times. However, many remain excluded and will need to turn to other measures previously announced. 

    What Is The Grant Based On?

    Your grant will be based on 80% of the average of your profits showing in your income tax returns for the 2019, 2018 and 2017 income tax years. 

    How Much Will I get? 

    You’ll get up to £2,500 per month, so you may receive £7,500, assuming the grant runs for the 3 months March, April and May. This seems to be convert into a maximum annual average profit of £37,500.

    How Does Other Income Affect This?

    • If you’ve mostly been living on second property income, with a bit of sole trader income, you’re not eligible.
    • If you’ve earnt more from an employment alongside being self employed, you’re not eligible.

    Helpfully, it appears that you’re still eligible if more than half your income in 2019 was from self employment trading income, but the previous two years it wasn’t.

    What If My Profits Were Over £50k?

    If the average of your profits over the three tax years 2019, 2018 or 2017 is over £50k, you’re not eligible, unless your recent 2019 profit is under £50k. The average of £50k exceeds the average of £37,500 anyway, so this seems to apply in practice to the profits of a partnership. 

    Can I Carry On Working In My Business?

    Unlike furloughed employees, you can carry on running your business and in fact it is a condition of the grant. Your business needs to have been affected by the Coronavirus so that you’ve lost trading profits. We don’t yet know how this will be proved.

    Are Partnerships Included? 

    Yes, partners of trading partnerships will be included in the same way, as long as the partnership’s profit is less than £50k.

    What If I Set Up My Sole Trader Business After 6 April 2019?

    It appears that you won’t be eligible for any grants under this scheme. 

    What About Sole Director-Shareholder Limited Companies?

    Limited companies can benefit from the previously announced furloughed package for employees. It appears that the government is happy for director salary, usually low, to be included. However, this may refer to companies with a few directors where there’s not enough work for all of them.

    We need confirmation where a sole director is carrying out basic director duties until the company’s trade is restored.

    How Do I Apply?

    You need to wait until HMRC contacts you and ‘invites’ you to make an application.

    When Will I Get It?

    The payment will be made in one lump sum in June. Until then, you need to apply for Universal Credit. We don’t yet know whether any Universal Credit payments made will be deducted from the lump sum paid later. 

    Where Does This End Up?

    The Coronavirus has caused a lot of us to change our world view in all sorts of ways.

    Today’s announcement may prove to be the day the Chancellor was given permission to bring in higher taxes for sole traders in the future on the basis that state support requires funding somehow.

  • Coronavirus – Without The Gym, Learn To Exercise Your Cashflow

    The Chancellor yesterday evening announced further measures to help businesses with their cashflow to bridge the gap during this extended period of reduced income. Now the gym is closed make sure you ‘work out’ which the best ones for you.

    Income Tax and VAT Deferrals

    The self employed July 2020 income tax payment on account for the 2019/20 tax year, will be automatically deferred until January 2021 with no interest or penalties accruing. This appears to be for sole traders and partnerships only, and not include directors or employees also due to make payments on account. [EDIT: This has been amended and now seems to include anyone making payments on account under self assessment including directors or employee].

    Similarly, VAT due between 20 March and 30 June 2020 won’t be collected by HMRC. [EDIT: HMRC have amended their guidance and now state that if you pay by Direct Debit you need to cancel it in good time and reinstate it later]. You will have until 5 April 2021 to catch up with this deferral. VAT refunds will be made as usual. If you’re on an annual VAT scheme to end of March, any VAT due will be deferred and if you’re due a refund, that will be paid. You’re still required to prepare your VAT return so you’ll receive a refund as normal if one is due. 

    I wonder where we’ll be next January and April 2021 when businesses simply can’t afford to pay the deferred amount, as well as the next payment on account. Therefore, where possible, it might be less painful to pay your income tax and VAT as normal. However, if your business is facing difficulty, take advantage of this to see you through, and we’d expect HMRC to be helpful once the imminent health and economic problems have improved. 

    These can be thought of as a simple Time To Pay arrangement without having to agree payments plans with HMRC on a case by case basis. Time To Pay still remains available and you may need to contact HMRC regarding your other tax bills.

    Business Interruption Loan

    These will be available from your bank early next week and will now be interest free for 12 months, a recognition that businesses need more breathing space to get their cashflow in order. They are also unsecured up to £250k meaning you don’t have to put your personal assets on the line. This is the most flexible way to help your cashflow where you decide how to use the money for the long term benefit of your business.

    Mortgage and Rent Deferral 

    You can apply to defer your personal mortgage for 3 months and landlords are offered a mortgage holiday to allow them pass on 3 months rent deferral to their tenants. These are only deferrals, with mortgage interest still accumulating and the rent ultimately due, so again very much temporary cashflow help, not a permanent saving.

    Employee Wages 

    For at least 3 months from 1 March 2020, if your employees aren’t working, because you can’t open your business due to the Coronavirus or your business has suffered a significant loss of business, and you cannot cover their wages, you need to classify them as ‘furloughed workers’ and HMRC will refund 80% of your staff’s wages, up to a £2,500 maximum per month.

    This appears to mean that if you pay your employee a gross salary of £30,000, you can apply to HMRC for a refund of £24,000. We don’t yet know how this links with the PAYE system, which presumably will operate as normal and continue to deduct taxes which apply to the £30,000. We’ll let you know as soon as more details are issued. 

    This should be claimed by all eligible businesses which need their staff to be available to them when they  continue to trade as normal. 

    Business Rates

    Not forgetting the 12 month rates holiday for the retail, hospitality and leisure sectors, and grants of between £10,000 and £25,000 previously announced, which are actual cash savings to keep. We don’t yet know if these grants will be included in taxable income, but we can save that for another day!

    SSP, Universal Credit, Employment and Support Allowance

    These are also payments to keep and are now easier to claim for the duration of the Coronavirus outbreak. The previously announced SSP refund scheme for up to 2 weeks is in place to help your employees. SSP is £94 per week. For the self employed with the virus or who need to self isolate or on low income, Universal Credit and/or a new style Employment and Support Allowance is available. ESA is £73 per week. Being eligible for some benefits opens the door for other benefits such as housing benefit, so is often worth a bit more than at first appears.

    Summary 

    Not all initiatves will be helpful for all businesses. Be clear which are deferrals and therefore need to be repaid someday or those which are cash payments or savings. Employee salary refunds and grants for small property based businesses, should always be claimed where eligible. VAT, income tax, mortgage and rent deferrals, Time To Pay, and loans need to be taken with care with a simple outline plan as to how you think these will eventually be repaid.

    You as a business owner will know which of these weighty options to pick and how to work out the best route for your business with help from trusted advisers, where appropriate.

  • Coronavirus – Loans, Grants & Tax – Small Businesses

    Here’s a quick summary of the sort of practical help notified this afternoon by the Chancellor. Together with a reminder of some useful tax rules which may also help with your cashflow.

    Business Rates:

    • No rates payable for 12 months for any business in the retail, hospitality or leisure sectors.
    • In those sectors, if your rateable value is less than £51k, you’ll also receive a cash grant of up to £25,000.
    • Any business which gets small business rates relief, will receive a cash grant of £10,000 (increased from £3,000 announced in the Budget).

    Government Backed Loans:

    • These should be available from your bank early next week starting 23 March and further details will be issued shortly. 
    • The government guarantee is for 80% of the loan, so your bank is likely to need some security for the other 20%.
    • No interest will be charged for the first 6 months.
    • The interest rate will be favourable and the term from 3 months to 10 years.
    • If you expect your business to recover from the disruption because you have a sound business, you may wish to take a loan out.

    Mortgage Holiday:

    • At least a 3 month mortgage holiday for those in difficulty, from your lender.

    Insurance Claims:

    • Insurers will pay out against policies that cover pandemics.

    Universal Credit:

    • If your income has dropped you may wish to access the benefit system.
    • This was made easier as announced in the Budget.

    Statutory Sick Pay (SSP):

    • If you’re a director of your limited company, you can pay 2 weeks if you need to self isolate.
    • The government will refund this £94 per week, maximum £188, to your company.
    • It will also refund SSP for your staff for up to 2 weeks to your business or your company.

    Using Existing Income Tax and Corporation Tax Rules:

    • As we’re near the end of the tax year, get your income tax return in as soon as possible from 6 April 2020, for a possible refund of some of your January 2020 tax payment. And know the exact amount due in July.
    • If you make a sole trader or partnership tax loss to 5 April 2020, generate a tax refund by carrying the loss back to 2019.
    • If you’re a start up sole trader or partnership, this loss can be carried back 3 years to generate a tax refund from your previous PAYE job or even from rental income.
    • If you’re a limited company and make a loss in your current year end, carry it back by a year to generate a tax refund.
    • If you’re working from home more than usual, claim more costs against your taxable income for your home office.
    • The sooner you get tax returns sent in, the sooner you can benefit from the above.
    • Getting your return in early, doesn’t bring forward any tax payment dates, but it does bring forward tax refunds.
    • A return of Time To Pay help from HMRC, where you phone HMRC to agree a delay in paying your tax. Have a realistic proposal ready that you expect to adhere to.

    Off-Payroll Working (IR35) Delay:

    • Freelancers and consultants worried about getting taxed as an employee from 6 April 2020, have a year’s reprieve until 6 April 2021.

    Thank you and stay well.

  • Budget 2020 – A pot-hole free drive in your electric car through magic money trees?

    There is much to be happy about in today’s Budget, where the magic money trees are well and truly thriving!

    Businesses will benefit from many announcements, particularly those who trade from a property, have one or two employees, and need a new car!

    Business rates are abolished for a year for rateable values of less than £51k and these same businesses will receive a £3k grant, as a response to the Coronavirus but it’s also part of the overall picture of dealing with competition from Amazon and other online retailers.

    Where possible and appropriate for your business model, businesses going forward may need to embrace online retail further. Having said that, many can provide a niche, local, personal service perhaps relying on online marketing, such as Facebook, but not online sales.

    With the money saved, and assuming you needed one already, an electric car is very tax efficient. The 100% write off against your tax bill has been extended beyond 2021 to 2025 with no benefit in kind until March 2021 and then minimal after that. VAT still can’t be recovered, however, apart from 50% through leasing.

    Your employees earning over £9,500 will pay less national insurance from April 2020, but you’ll still pay 13.8% national insurance on their salaries over £8,788 with a £4k offset from the increased employer annual allowance of £4k. For example, if you have one employee earning £37,774, the £4k annual allowance will offset all the employer national insurance due. Even employ a veteran where you save employer’s NI for a year. And remember to claim the statutory sick pay for up to 2 weeks if your employees need to be away from work due to the Coronavirus.

    If you’re a sole trader, your Class 4 national insurance of 9% will, from April 2020, only kick in after you’ve earnt profits of over £9,500. If the Corornavirus reduces your profits, however, remember to claim Universal Credit. You may need to pay Class 2 national insurance voluntarily to maintain your state pension credit.

    If you also carry out Research and Development, R&D, the new restriction on cash refunds for loss making businesses is still coming in, but delayed until April 2021, and if your claim is less than £20k, there’ll be no restriciton at all. So, as you were! Carry on with R&D and cash claims even if you are just a one or two director company on minimal salary.

    If your business survives the Coronavirus, perhaps with funding help from HMRC Time To Pay or your bank and one day you’re ready to sell your business, you’ll pay capital gains tax of 10% on the first and only £1m business capital gain in your lifetime, and 20% on the rest of the gain. Many small businesses are sold for less than £1m, so this is a welcome compromise effective immediately.

    Some of the good news is ofset by confirmation of the corporation tax rate remaining at 19%, but also HMRC being given 1,300 more staff to get tax HMRC believes it’s entitled to! Be careful you don’t get caught up in that, where HMRC have been known to go for low hanging fruit, possibly hanging on a magic money tree 😀, rather than trickier cases. 

    Stay well! 

  • Springing Tax Changes On Us From April 2020

    With the spring Budget less than two weeks away, it’s easy to forget some major changes due to come in this spring unlikely to be changed by the Chancellor. 

    Property Interest Tax Relief – Full restriction

    Four years ago this seemed a long way off, but we’re now here. From April, there will be no tax deduction for interest on your buy-to-let mortgage. You’ll get a calculated tax credit at 20% offset against your tax bill, but your taxable income is reduced only by repairs, professional fees, void period costs, etc.

    This means you’re more likely to find yourself in the higher rate tax band than before or having to pay back child benefit. Or even at the £100k threshold where your tax free personal allowance starts to get taken away. 

    Property Sales – Reporting and paying capital gains tax within 30 days of completion

    A major change for UK resident taxpayers requiring taxpayers and their conveyancing solicitors to take action early on in the sales process. Your accountant will need to know of the sale and complete an online form to calculate the capital gains tax due and advise you how much tax to pay within 30 days of completion. A payment reference is required, so the practical dealdine is a few days before that.  

    Your home where no capital gains tax is due is exempt, as are small gains under £12k, or where you have sufficient capital losses to offset the gain.

    Property Sales – Reduced reliefs available

    Unfortunately, at the same time, presumably deliberately(?), there will be higher property taxable gains due to changes in the calculation of capital gains tax on the sale of a home in which you lived and subsequently rented out.

    The valuable ‘lettings relief’ is going completely and the deemed tax free period before sale is being reduced from 18 months to 9 months. Apparently, 9 months is plenty of time to sell a property. I’m not sure many estate agents would agree with you in this market. 

    IR35 and Off-Payroll Working – Your client will determine your status

    Getting a lot of publicity already, the Chancellor has said this will receive a soft landing. However, it has spooked many large businesses into cancelling all freelancers and consultants, reducing the work available in this sector despite suiting both parties very well and where significant amounts of tax are still paid. 

    Try to agree with your client that you are independent and shouldn’t be treated like an employee. If this doesn’t work, you should become an employee ‘proper’ and receive all the benefits associated with it. IR35 is the worst of both worlds!

    Research and Development – R&D – Restriction to payable tax credits

    The cash refund part of R&D paid to loss making SMEs will be restricted to 3x their PAYE bill. As many SMEs don’t have much of a PAYE bill, for all practical purposes this is being taken away. It has been a useful cash injection for many start ups who will now need to fill the gap from other sources such as external investors, crowdfunding or owner loans.

    At least when they take on a freelancer, SMEs aren’t affected by the new IR35 rules mentioned above and can carry on as before. 

    Electric Cars (EV) – Super Charged Tax Reliefs

    To end on a positive note, non ICE cars are really worth a look at for the business owner. Where your company buys a 100% EV, there are 100% capital allowances to reduce your taxable profits and no taxable benefit on you, with minimal increases over the next few years.

    Keep an eye on the rules after that, but, for now, you may want to take advantage of some good tax news amongst the less-appealing other tax news referred to above.

  • It’s Tax Return Season – 5 reasons to avoid the rush

    1 – You may be due a tax refund

    If so, don’t you want that cash in your account rather than HMRC’s? Refunds do occur quite often.

    If you’re a start-up sole trader still working in a PAYE job and you had a PAYE job in the previous few years, you may be able to claim a tax refund for the PAYE income tax you’ve paid.

    Even for employees, your tax code may have been wrong or you paid more tax-deductible costs, like charitable donations, than the year before.

    2 – Certainty

    If HMRC need to ask questions, they have 12 months from the date you file the return. So, if you submit it on 6 April 2019, HMRC must ask questions by 5 April 2020.

    Firstly, HMRC is likely to regard an early filing as a good thing. Secondly, they need to be very organised to get their notice to you that early in the tax calendar. And thirdly, you have more certainty that your tax bill is agreed.

    3 – Quality

    With more time far away from a deadline, the job isn’t rushed and less errors are likely to arise.

    4 – Be proactive

    More time also allows you and your accountant to review your tax position, discuss your business and your future plans, and take action at the beginning of the next tax year in good time and with proper consideration.

    All in all, less stress.

    5 – Smile

    You can fully enjoy Christmas and the New Year without your tax return hanging over you!

    At On The Spot Tax Accountants, we work with you throughout the year. We get to know your business inside out and keep your records up-to-date to avoid the end-of-year panic.

    If you’d like this approach to the wonderful world of tax and accounting, call us for a free initial chat.

  • On Non-Budget Day, 5 Tax Planning Tips You Can Rely On.

    1. Incentives to innovate such as research and development (R&D) tax relief are likely to continue. Linked to these are enterprise investment schemes (SEIS and EIS) as a way of encouraging investment into certain companies. Therefore, you could take the view to not hold back and carry on planning for these to be around. You business is also likely to receive 100% capital allowances on its capital spend. Keep calm and carry on!
    2. Low salary and high dividends remain likely to be tax efficient. With owner-managed companies, the shareholder-director has two capacities: as a shareholder and as a director. As long as this distinction remains, and national insurance remains high, it seems hard to see how a high salary can be more tax efficient than taking dividends.
    3. The company car has been restored! As long as it’s electric. From 6 April 2020, the taxable benefit, including ‘fuel’, will be £ZERO for all 100% electric cars. It will also be £ZERO for new hybrid cars registered on/after 6 April 2020 with up to 50g/km emisisons and at least a 130 mile range. The rates increase a tiny bit in later years, but it’s still likely to be a good option for your company, particularly if you take into account the company also saves tax on 100% of the cost in the year of purchase.
    4. Always at least consider making pension contributions. These work well for profitable companies when owners have taken all the dividends they need or want within the tax brackets and thresholds, and at the same time, they save corporation tax. Although higher rate tax relief for income tax may be reviewed, it would be a brave Chancellor to take away pension freedoms. Therefore you could arrange for company contributions to be paid into your pension scheme, wait until only age 55 to take, say, 25% out tax free, but delay taking the entire pension until later. Admittedly the 25% tax free part may be at risk, but I wouldn’t expect that to be brought in overnight. And you could at least still take your pension when your income tax rate is low, for whatever reason. Please take IFA advice along the way.
    5. Business and tax year ends – timing of income, costs, dividends. Always remember your company year end date eg 31 March and the tax year end of 5 April and ensure that you use them well. For example, when you pay interim dividends, don’t pay them on 5 April if you want it to be taxed in the next year. If making company pension contributions as referred to above, make sure the company pays them before the company year end, otherwise the corporation tax relief is delayed by 1 year. Finally, if you’ve made losses investigate if you can get a tax refund whether you’re a sole trader, partner or limited company.

    Conclusion

    Of course, no-one knows what will actually happen, so please know there is some risk with any decision you take. Just take good advice and then decide!

  • After lots of Tricks, it’s time for some Treats! Take over £100k from your Limited company tax free.

    Please see below for further details. We do hope these prove to be some treats during a time of plenty of tricks.

    • Salary – If you have no other income you should each consider using your £12.5k tax free personal allowance.
    • Trivial Benefits – These are new and are designed to save HMRC’s time dealing with small items. Each benefit must cost less than £50 Incl VAT otherwise the whole amount is taxable.
    • Annual Parties – One of our old favourites. This could be a Halloween party, as well as a Christmas party. Everyone has to be invited and it’s £150 Incl VAT per person plus £150 Incl VAT for a guest. Again, if you spend more than this including on extras such as taxis, the whole amount is taxable.
    • Cycle To Work Scheme – Has to be offered to everyone and the bike used more than 50% of the time for commuting or business journeys. The bike is lent to you and you then buy it from the company at a second hand value a few years later.
    • Private Health Checks – A little known annual exemption regardless of any other taxable private healthcare arrangements you may have.
    • Eye Tests – A more well-known exemption and assumes you need a test because you use a computer monitor, which is most of us!
    • Tax Free Dividends – Whatever other income you earn, everyone gets £2k of dividends tax free. If you have any of your £12.5k tax free personal allowance available, that’s also available for a tax free dividend.
    • Pensions – These need to be Employer Contributions and usually the limit is £40k each but take care on the detail and take IFA advice. The limit might be higher or lower in certain situations.
    • Relevant Life Policies – A death in service policy where neither the premiums paid by the company or the benefits paid out are taxed on you or your beneficiaries. Again, IFA advice is recommended.