Mr slides 18 april 2013


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Tax Tips Presentation 18 April 2013

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Mr slides 18 april 2013

  1. 1. 18 April 2013 Mark Rubinson Arram Berlyn GardnerCopyright Arram Berlyn Gardner 2013
  2. 2. What are we looking at today? Personal Tax Capital Gains Tax Property Tax Benefits in Kind Pensions, ISAs & Investments - EIS, SEED, SEIS,VCTs Domicile Status Business Property Inheritance TaxCopyright Arram Berlyn Gardner 2013 Charitable Giving
  3. 3. Personal Tax Planning 2012/2013 2013/2014 2014/2015 Personal allowance £8,105 9,440 10,000 Basic rate band £34,370 32,010 31,865 5 million people 41,450 £42,475 41,865 expected to payCopyright Arram Berlyn Gardner 2013 40% tax by 2015
  4. 4. Personal Tax Planning Any unused personal allowance cannot be carried forward Jointly owned assets with spouse Income assumed to be received 50:50 regardless of actual ownership (default position) – remember to inform HMRC if otherwise Consider transferring assets so lower paid spouse gets investment income Beware though of marital issues!Copyright Arram Berlyn Gardner 2013
  5. 5. Personal Tax Planning Reduced personal allowances if income above £100,000 No indexation of limit Allowance reduced by £1 for each £2 of excess over £100,000 No personal allowance above £118,880 income in 2013/14 (2014/15 £120,000) Top rate now 45%Copyright Arram Berlyn Gardner 2013 Effective marginal tax rate 60% between £100,000 and £118,880 (Consider 60% tax relief on pension contributions)
  6. 6. Child Benefit Tax Full year effect in 2013/14 Started 7/1/2013 but no tax collected yet – awaits self-assessment returns Starts at £50,000 income and all benefit is lost if income £60,000 or more 1% child benefit charge per £100 of income over £50,000 Effective 57.52% marginal rate for two-child family Inter-spouse transfer or stop payment? Pension contributionCopyright Arram Berlyn Gardner 2013 But new childcare scheme phased in from autumn 2015 worth up to £1,200 per child, per year eventually
  7. 7. EIS 30% income tax relief on cost of EIS shares Maximum £1m per annum per person Unlimited deferral of CGT up to the amount of the cost of the EIS shares (held over gain) Tax exempt capital gains on profitable disposal of shares Tax relief against either income or capital gains for any capital losses Exempt from IHT if held for 2 years at deathCopyright Arram Berlyn Gardner 2013 Maximum shareholding 30% for income tax relief EIS for all new companies where possible
  8. 8. Seed EIS – 64% tax relief! 50% income tax relief for Investments up to £100,000 EVEN IF YOU DON’T PAY 50% TAX! Exempt from CGT when sold Re-investment exemption continues but only ½ the re-invested gain Therefore maximum possible is 64% tax relief in 2013/2014 (50% plus ½ of 28%) Each company can only raise up to £150,000 under SEISCopyright Arram Berlyn Gardner 2013 See accompanying notes
  9. 9. ISA Applicable - 2013/14 £11,520 per person £ 23,040 per couple PEP/ISA millionaires!!!Copyright Arram Berlyn Gardner 2013
  10. 10. Children- ISAs Junior ISA £3,720 for 2013/14 up to the age 18Copyright Arram Berlyn Gardner 2013
  11. 11. Venture Capital Trust (VCT) Maximum £200,000 30% tax credit against income tax liability Exempt from CGT Company can raise maximum of £5mCopyright Arram Berlyn Gardner 2013
  12. 12. Employ Spouse or Child Business will get tax relief on salary Should be justifiable Consider a salary of approx £7,000 per annum (if justifiable) No PAYE/NI Consider making your spouse a partner Partners do need to be genuinely involved as business partnersCopyright Arram Berlyn Gardner 2013 (though not necessarily equally)
  13. 13. Working Abroad Time your departure carefully If away for a whole tax year, the income may be free of all UK tax Statutory definition of residence introduced from 6 April 2013 Very complicatedCopyright Arram Berlyn Gardner 2013
  14. 14. Remittance Basis for Non Doms Annual £30,000 remittance basis charge (RBC) applies if non dom and tax resident for at least 7 out of the previous 9 tax years Permits non doms to avoid tax on non UK income and gains unless remitted or enjoyed in the UK But loss of personal allowance & CGT annual exemption.Copyright Arram Berlyn Gardner 2013
  15. 15. Remittance Basis for Non Doms (cont) A £50,000 RBC was introduced on 6 April 2012 for non doms who have been tax resident in the UK for 12 years or more out of the previous 14 years The £30,000 RBC will continue to apply for those resident for more than 7 years but less than 12 Remittance basis/arising basis can be claimed/disclaimed on a year by year basis depending on the facts See accompanying notesCopyright Arram Berlyn Gardner 2013
  16. 16. Remittance Basis for Non Doms (cont) A claim will not be required for individuals with unremitted offshore income/gains of less than £2,000 They will still be entitled to personal allowances and the CGT annual exemption Necessary to have a source of overseas income or gains which can be nominated to support the remittance basis claimCopyright Arram Berlyn Gardner 2013
  17. 17. Remittance Basis for Non Doms (cont) This need only be £1 per annum (non UK income) Very complex Beware of tax in other jurisdictions From 6 April 2012 remittances of foreign income/gains invested in a company carrying on a qualifying UK trading or commercial letting business have been exempt See accompanying notesCopyright Arram Berlyn Gardner 2013
  18. 18. Remittance Basis for Non Doms (cont) No limit Segregate accounts to hold non UK income, “clean” capital and non-UK capital gains.Copyright Arram Berlyn Gardner 2013
  19. 19. Income -v- Capital Income -v- capital (45% -v- 18%/28%) HMRC are looking carefully at CGT/income tax anti avoidance legislation Specific investments Zero coupon bonds Zero dividend preference shares Low yield funds Buy to let propertyCopyright Arram Berlyn Gardner 2013
  20. 20. Spouses Transfer of 50% of shares in trading company to spouse (strong marriage!) No income shifting problems (at present) Spouse can get Entrepreneurs Relief but has to be a director/employee and must have been a shareholder for at least 12 months Dividends to husband and wife as opposed to only one spouseCopyright Arram Berlyn Gardner 2013 After 2 years both spouses can get Business Property Relief (for IHT purposes)
  21. 21. Capital Gains Tax Annual exemption £10,900 (couples £ 21,800) for 2013/14 Lower rate 18% - Higher rate 28%Copyright Arram Berlyn Gardner 2013
  22. 22. Capital Gains Tax (cont) Entrepreneurs’ Relief 10% Maximum £10million per person. Husband and wife get £10million each (£20million total). e.g. Sell for £20million, can save £1.8million. Employee 12 months or more including being a director Shareholding 5% or moreCopyright Arram Berlyn Gardner 2013 12 month and 5% rules are relaxed for shares acquired on the exercise of EMI options.
  23. 23. Entrepreneurs’ ReliefCopyright Arram Berlyn Gardner 2013
  24. 24. Capital Gains Tax (cont) If one spouse has unused losses these can only be used against gains incurred by the same spouse Transfer of assets before the sale can therefore reduce the overall tax liability No CGT on transfer of assets between permanent separation and the following 5th of April There will be CGT from the following 6 April onwardsCopyright Arram Berlyn Gardner 2013 Therefore, separate on 6 April if possible!
  25. 25. Negligible Loss Claim If you subscribe for unquoted trading shares can get 45% income tax relief on lossCopyright Arram Berlyn Gardner 2013
  26. 26. Property Main residence relief Ensure you pay no CGT! You can elect which property is your PPR (whichever country!) Last three years exempt PPR election must be submitted to HMRC within two years of a second property being available for occupation.Copyright Arram Berlyn Gardner 2013 Non PPR’s should possibly be owned jointly by couples to get two CGT annual exemptions. See accompanying notes
  27. 27. Lettings Relief Available on sale of let property provided it was your Principal Private Residence (PPR) at some point during ownership Relief is the lower of: 1.The gain attributable to the letting period 2.The gain attributable to the PPR period 2.£40,000 See accompanying notesCopyright Arram Berlyn Gardner 2013
  28. 28. Rent a Room Maximum £4,250 Tax freeCopyright Arram Berlyn Gardner 2013
  29. 29. Business Premises If business premises are owned personally but used in your company or partnership and a full rent is charged this can impact on entrepreneurs reliefCopyright Arram Berlyn Gardner 2013
  30. 30. Bank Deposit or Investment Account Consider closing account before 6 April 2014 to crystallise interest income in 2013/2014 if beneficial.Copyright Arram Berlyn Gardner 2013
  31. 31. Pensions Under 75 If you are under 75, you can make personal pension contributions of up to £3,600 (£2,880 net). You do not need any earnings! Those aged over 55 may even draw the pension immediately including a 25% cash free lump sum.Copyright Arram Berlyn Gardner 2013
  32. 32. Pensions (cont) Maximum £50,000 for 2013/14 (£40,000 2014/15) Basic rate relief at source 3 year carry forward - £150,000 (maximum £200,000) Remember a £50,000 gross contribution costs a 45% taxpayer £27,500!Copyright Arram Berlyn Gardner 2013
  33. 33. Pensions (cont) Life time limit for 2013/14 = £1.5m reducing to £1.25m in 2014/15 25% tax free lump sum at aged 55 Beware annuity rates!Copyright Arram Berlyn Gardner 2013
  34. 34. Inheritance Tax 40% of a person’s assets on death plus gifts made in the seven years before death over the nil rate band £325,000 for 2013/14 A person is deemed domiciled in the UK and subject to IHT on worldwide assets if resident in the UK for 17 out of the past 20 tax yearsCopyright Arram Berlyn Gardner 2013
  35. 35. Inheritance Tax (cont) If not deemed domiciled in the UK subject to IHT only on UK situs assets (regardless of residency status) Therefore careful planning required if you are likely to become deemed domiciled in the next couple of yearsCopyright Arram Berlyn Gardner 2013
  36. 36. Inheritance Tax (cont) Make regular gifts such as paying school fees, etc Transfer assets prior to death and make sure you live for 7 years! Or Transfer £325,000 (£650,000 for married couples) into a trust every 7 years OrCopyright Arram Berlyn Gardner 2013 Give away £325,000/£650,000 every 7 years
  37. 37. Inheritance Tax Planning (cont) No IHT implications:- £3,000 personal annual allowance for gifts to anyone £5,000 to children when they marry Any number of gifts up to the value of £250 Normal expenditure out of incomeCopyright Arram Berlyn Gardner 2013
  38. 38. Inheritance Tax Planning (cont) IHT exempt assets :- Assets left to spouse/civil partner Assets left to charities Assets left to political parties (special conditions apply)Copyright Arram Berlyn Gardner 2013
  39. 39. Inheritance Tax Planning (cont) IHT exempt or 100% business property relief available on:- Farmland Interests in trading partnerships Sole trader business Shares in a qualifying EIS company Unquoted shares – controlling interest - 100% relief Land, building, etc used in the business – 50% relief AIM shares if held for 2 years or more – 100% reliefCopyright Arram Berlyn Gardner 2013
  40. 40. Inheritance Tax Planning (cont) Write life assurance policies into Trust to ensure that they are paid free of IHT Review your Will prior to the tax year endCopyright Arram Berlyn Gardner 2013
  41. 41. Inheritance Tax Planning (cont) Family debt scheme No CGT No GROB See accompanying notesCopyright Arram Berlyn Gardner 2013
  42. 42. Charitable Giving Obtain tax relief for cash gifts if you make a Gift Aid Declaration Up to 45% tax relief - Must be a registered charity Visit Arram Berlyn Gardner 2013
  43. 43. Charitable Giving (cont) Can elect for donations made in one tax year to be treated for tax purposes as if you have made them in the previous year. Should elect if tax rate is higher in the previous year Election must be made in writing at the same time as, or before, filing tax return for the earlier year Further relief for gifting certain investments in shares or land and properties to charities This is a deduction from total income and is potentially veryCopyright Arram Berlyn Gardner 2013 valuable Carry back to previous tax year is not available
  44. 44. Charitable Giving (cont) If 10% or more of your net estate is left to charity the IHT rate applying to the Estate is reduced to 36% from 40%Copyright Arram Berlyn Gardner 2013
  45. 45. Annual Residential Property Tax From 6 April 2013 ARPT levied on all high value residential property owned by non-natural persons High Value = more than £2m as at 1 April 2012 or date of purchase if later Non-natural persons = limited companies, partnerships with a corporate member and collective investment schemes Exemptions for property letting and property developmentCopyright Arram Berlyn Gardner 2013
  46. 46. Annual Residential Property Tax Property Value ARPT £2m - £5m £15,000 £5m - £10m £35,000 £10m - £20m £70,000 £20m+ £140,000 Must submit an ARPT return to HMRC by 30 April each year even if relief is to be claimed for an exemptionCopyright Arram Berlyn Gardner 2013
  47. 47. CGT on high value residential property CGT at 28% is payable by non-natural persons who pay the ARPT and make gains on the sale of the property Only the increase in the value of the property since 6 April 2013 is taxed Applies both to UK resident and non-UK resident non-natural personsCopyright Arram Berlyn Gardner 2013
  48. 48. Real Time InformationCopyright Arram Berlyn Gardner 2013
  49. 49. Copyright Arram Berlyn Gardner 2013
  50. 50. Capital Allowances AIA £250,000 from 1 January 2013 to 31 December 2014 Complicated transitional rules Spreadsheet available from ABG to perform the calculationsCopyright Arram Berlyn Gardner 2013
  51. 51. Corporation Tax Main rate from 1 April 2012 is 24% Small profits rate 20% (up to £300,000) Y/e 31.3.2014 23% Y/e 31.3.2015 21% Y/e 31.3.2016 20%Copyright Arram Berlyn Gardner 2013 Marginal rate now 23.75%
  52. 52. Dividends Lots of companies (often owner managed companies) pay dividends quarterly Paperwork must be drawn up Regular management accounts Must have distributable reserves Dividends – higher rate tax 25% for 40% taxpayers Salaries – total NIC costs up to 25.8% (13.8% plus 12%)Copyright Arram Berlyn Gardner 2013 Maximum tax on dividends 2013/14 is 30.6% for additional rate taxpayers
  53. 53. Dividends If gross dividend income (including 10% tax credit) for 2013/14 falls into the basic rate band of £41,450 including personal allowance there will be no tax payable on the dividend (£82,900 gross per married couple). Consider transfer of shares to spouse before dividend payment. Beware marital issues!Copyright Arram Berlyn Gardner 2013 Remember that tax credits on dividends are not repayable.
  54. 54. Extracting Profits Salary National Insurance totals 25.8% but salary is deductible from taxable profits in the company Bonuses Bonus must be due and payable before the company year end even if paid after the year end (within 9 months) Dividends Up to £41,450 gross no additional personal income tax payable. (£82,900 per married couple) However, not deductible expense for corporation tax purposes.Copyright Arram Berlyn Gardner 2013 No National Insurance on dividends Best to take dividends rather than salary
  55. 55. Introduction of Corporate Member into existing LLP Partnerships are transparent for income tax purposes Therefore very profitable LLP’s/partnerships will pay high tax regardless of members/partners drawings Particular problem with profitable LLPs/partnerships where all money is not taken out Solution: introduction of a corporate member into an existing LLPCopyright Arram Berlyn Gardner 2013 NB – the company must introduce capital amounts to the LLP or have a commercial purpose otherwise its profit share will be taxed on the individual members
  56. 56. Incorporation of post April 2002 Limited Liability Partnership (LLP) Provided an LLP’s goodwill and other assets are sold to a new company with consideration due to former members it should be possible to achieve tax savings Drawings can be further enhanced by declaring dividends up to the higher rate tax threshold (approx £37,000 net per shareholder – assumes no other income) Corporation tax at 20% to 23% rather than income tax at upCopyright Arram Berlyn Gardner 2013 to 45% Potential for tax free drawings
  57. 57. Incorporation of post April 2002 Limited Liability Partnership (LLP) Capital Gains Tax payable on incorporation but: 10% up to £10m (Entrepreneurs Relief) Write off of goodwill in limited company accounts is deductible for Corporation Tax purposes Goodwill should be independently valued Sale agreement between LLP and limited company shouldCopyright Arram Berlyn Gardner 2013 have an adjuster clause which limits the value of the goodwill to an amount agreed with H M Revenue & Customs
  58. 58. Enterprise Management Incentive Scheme (EMI) Directors can choose which employees receive EMI options Company can obtain a corporation tax deduction equal to the excess of the market value of the shares at the date of exercise over the exercise price The options can be granted conditionally subject to performance criteria The directors can decide the exercise and option periodCopyright Arram Berlyn Gardner 2013 Employees don’t have to pay anything until the option is exercised. See accompanying notes
  59. 59. Research & Development tax credits Rate of R&D tax credit for SMEs rises to 175% since 2008 200% from April 2011 225% from April 2012 Subject to EU State aid approval See accompanying notesCopyright Arram Berlyn Gardner 2013
  60. 60. Employment Related Securities Shares to employees Beware! See accompanying notesCopyright Arram Berlyn Gardner 2013
  61. 61. Mitigation of SDLT Stamp Duty Land Tax Residential maximum is now 7% of the purchases above £2million. (15% over £2m for non-natural persons e.g. limited companies and partnerships with a corporate member) Strategies to reduce SDLT from 7% to approximately 1.5% Subject to non disclosure agreementCopyright Arram Berlyn Gardner 2013 7% rate only applies to wholly residential “contracts” it will not apply to “mixed purchases”
  62. 62. Enterprise Zones 21 Enterprise Zones including Birmingham & Solihull Leeds City Region Sheffield City Region Liverpool City Region Greater Manchester West of England Tees Valley North EasternCopyright Arram Berlyn Gardner 2013 The Black Country Derby, Derbyshire, Nottingham and Nottinghamshire London (Royal Docks)
  63. 63. Enterprise Zones Enterprise Zones include incentives for growth including: 100% business rate discount worth up to £275,000 over 5 year period Business rate growth in the Zone for 25 year to go to the local authority Simplified planning rules Support to ensure superfast Broadband is rolled outCopyright Arram Berlyn Gardner 2013
  64. 64. Benefits In Kind Some benefits in kind are still tax efficient including mobile phone and cars with low emissions Electric company car – no tax charge up to 5 April 2015Copyright Arram Berlyn Gardner 2013
  65. 65. Company Cars Often better off owning car personally and claiming an allowance for business mileage. •Up to 10,000 business miles - 45p per mile •Each additional mile over 10,000 miles - 25p per mile Need to maintain a detailed log of the business journeys.Copyright Arram Berlyn Gardner 2013
  66. 66. Company Cars (cont) Company car tax is extremely high. If provided with free fuel for company car, the tax charge is based on CO2 emissions Consider reimbursing the company for private fuelCopyright Arram Berlyn Gardner 2013
  67. 67. Vans If private use, then basic benefit is charged at £3,000 a year. Extra charge £564 (2013/14) if free fuel for private use is supplied. If no private use of van, then no benefit and no charge arises.Copyright Arram Berlyn Gardner 2013 See accompanying notes
  68. 68. Copyright Arram Berlyn Gardner
  69. 69. VAT Turnover threshold now £79,000Copyright Arram Berlyn Gardner 2013
  70. 70. VAT Reclaim input VAT for entertaining overseas customers Includes potential customers Clarified in Customs Brief 09/11 – February 2011 Can go back 4 years!Copyright Arram Berlyn Gardner 2013
  71. 71. Football!!! Box at a football ground Taxpayer won! See accompanying notesCopyright Arram Berlyn Gardner 2013
  72. 72. Summary Use CGT annual exemption – it can’t be carried forward or transferred Use IHT annual exemption of £3,000 Use up your ISA allowance Try and get your children to use their junior ISA allowance Consider use of spouse (strong marriage!)Copyright Arram Berlyn Gardner 2013
  73. 73. Summary (cont) Separate permanently on or very near 6 April! Make use of capital allowances Consider timing of expenditure Pension contributions – remember a £50,000 contribution will cost only £27,500 Non doms need to consider arising basis/remittance basisCopyright Arram Berlyn Gardner 2013
  74. 74. Summary (cont) Consider timing of bonuses/dividends Business Premises Renovation Allowance Scheme Possibility of a CGT negligible value claim at 45% IT relief Rent a room - £4,250 per annum How To Get Entrepreneurs Relief on a 20% shareholding even if you only own 5%Copyright Arram Berlyn Gardner 2013 Always speak to your tax adviser
  75. 75. Contact details Mark Rubinson Arram Berlyn Gardner 30 City Road London EC1Y 2AB 020 7330 0005Copyright Arram Berlyn Gardner 2013
  76. 76. Q&A Thank you for joining us this morning We will happily answer any of your questions over coffee this morning.Copyright Arram Berlyn Gardner 2013