FAQ's
What is the tax difference between being employed and self-employed?
The self employed suffer less National Insurance and have greater scope for deduction of expenses so most people would rather be treated as self-employed. Status is not a matter of choice and the terms you work under must objectively support your status.
Should I incorporate my business?
Turning your business into a limited company can still be very tax efficient as well as being a suitable entity through which to grow your business. Individual circumstances can differ greatly so it is best to do tax projections and consider all the implications before taking action.
Should I buy a company car or run my business vehicle personally?
The decision if very much based on the type of car you wish to drive, how much it costs and its CO2 emissions.
What is the best way to get money out of my company?
It depends on the rate of Corporation tax the company pays and also the tax rate of the recipient of income. Salary, dividends, rent, interest on loan, and pension contributions should all be considered.
Should I be registered for VAT?
If you make taxable supplies above the VAT registration limit (currently £67,000) you must register and in other circumstances it may benefit you to register voluntarily. Often supplies will be both exempt and zero rated as well as standard rated and this will affect the need to register and your ability to reclaim VAT you pay.
Should I make an election for disposals of land to be subject to VAT?
You can recover VAT on land transactions if you opt to tax but you then have to charge VAT when you rent or sell property. The VAT implications of any property transaction need to be considered but are all too often overlooked.
Do I qualify for the new Entrepreneurs relief?
The new relief is potentially worth £80,000 and many businessmen will be able to claim it but it is not as widely available as Taper Relief. There are conditions to be met and a qualifying period of only one year so action prior to a disposal can improve the position.
Can my wife become a shareholder in my company and receive dividends?
The Revenue were unsuccessful in taxing dividend income on a spouse who was the main contributor to a business in the Artic Systems case and have not as yet introduced legislation to prevents ‘income splitting’ as they call it. Dividend arrangements which exploit lower rates of tax do however have to be considered in the light of the existing ‘settlements’ rules. This area is constantly changing and so advice relevant to your particular circumstances is essential.
What do I have to do when a dividend is paid?
When a dividend is paid the directors or shareholders have to meet to pass a resolution. Documentation is desirable. Without a record of the meeting and vouchers etc the payment could be seen by HMRC as salary or loan with consequent tax liabilities.
How can I reduce the Inheritance Tax my heirs will suffer?
Lifetime gifts remain the simplest way to reduce IHT. If you need to retain the right to benefit from the capital you wish to give away the ‘Discounted Gift Scheme’ is worth considering. Transfers to lifetime discretionary trusts allow you to control the use of money you give away.
Should I make a new will now the Inheritance Tax rules have changed?
The tax efficient Wills drafted before it became possible to transfer nil rate bands may still be the best way to reduce IHT and protect assets against the cost of long term care etc. Wills should be reviewed regularly however to ensure that they reflect current circumstances and personal wishes.
How much can I pay into my personal pension?
The old rules which limited tax relief on pension funding have been replaced by much less restrictive funding rules. Substantial amounts of company profits can be sheltered from Corporation tax by making contributions into personal pensions for directors (as much as £230k per annum per director).
Can I get any tax relief on the cost of my new building?
Recent changes to Capital Allowances rules mean you cannot claim income tax relief on the cost of industrial buildings but it is possible to claim allowances on the cost of certain items within the building (heating, water, electrical systems etc). It is usually necessary to survey the building or analyse records of cost to maximise the claim.
Am I paying too much National Insurance?
People who have more than one employment in a tax year or who are employed and self employed at the same time often pay more than the annual maxima. A refund can be claimed and in certain circumstances you can apply for deferment of certain payments if it appears you will pay too much at the start of the year.
Tax Investigations Service
Why Do I Need This Service?
Businesses in particular are being targeted by HMRC. The yield from Full Business Enquiries increased by 7% in 2004/5 and the yield from Employer Compliance Enquiries increased by 11% to raise £312million.
What does an enquiry cost?
The average cost of defending an investigation is over £2000. It costs considerably more than this for lengthier enquiries or larger companies.
What does the service provide?
The service covers the cost of professional fees relating to:Income Tax and Corporation Tax Assessment Full Enquiries, IR35 Enquiries, Employer Compliance Disputes, HMRC VAT Disputes. Clients also have access to a 24 hour business legal advisory service which includes advice on Employment Law, Health & Safety and Personnel.