2. 10 top tax tips
for 2014
LAURENCE PARRY
Head of Private Client
Tax
3. Tip 1
o LLP changes
o Ensure that you know whether your LLP members
are ‘salaried’ or not
o Check tests
o Capital contribution
o Profit sharing
o Significant influence
o Awaiting update from HMRC
4. Tip 1 – profit sharing arrangements
o Must be related to profit of LLP as a whole
o HMRC’s view = % of total profit
o But, why not stratify profit? Want to pay partner £100k
o A) 20% on profits up to £500,000; +
o B) 5% on profit s above £500k.
o As long as HMRC would accept 5% as a share overall, then
should be no issue;
o As long as the % in B) is less than the employers’ NIC rate
still cheaper
o Must be reasonable – A) cant be too high, nor B) too low!
5. Tip 1 – profit sharing arrangements
o New guidance note issued 21/2
o Emphasises need to relate to profits as a whole, not
personal performance
o May be able to reverse engineer
o HMRC give examples of ‘points’ being allocated (examples
21 & 22)
6. Tip 1 – ‘significant influence’
o If a member has ‘significant influence’ then wont be
a salaried member
o Influence over running of LLP (not just their bit, or
portfolio);
o Equates to board of directors;
o If don't have a management committee – perhaps could?
o If business capable of disaggregation, consider separate
LLPS – eg branches
o Watch regulation and cost
7. Tip 1 – significant influence
o Specific discussion re regulated businesses
o Para 2.5.3 ‘individual in question significantly
contributes to the firm's major decisions
(management, strategic or investment-related), then
it is likely that HMRC would accept that this
constitutes significant influence for the purpose of
Condition C.’
8. Tip 2 – corporate partners
o
o
o
o
Decide!
LLP – if going to take profits out;
Limited – if profits to be retained
Influencing factors:
o new equity holders?
o potential changes to dual contracts
o If early years, losses available through LLP
o watch restriction
9. Tip 3 – corporate partners
o If Limited?
o Incorporation can give benefits
o Sale at Market value – may benefit from ER
o Amount payable for business left outstanding and repaid
from future cash flows
o Need to watch reg cap
o ‘Dry’ tax charge – 31/1 tax year following sale
o Cannot sell to existing corporate member – needs to be a
Newco
10. Tip 4 – liquidate existing corporate partner
o May get ER
o Activities must be 80% trading
o Cash on deposit not an ‘activity’
o Risk if invested
o If ER in doubt, consider retaining and investing without dry
tax charge
o Cost of liquidation perhaps £5k - £10k
11. Tip 5 – non-doms and remittances
o Be careful!
o HMRC nudge letters
o Use of credit cards in UK paid for overseas;
o Payment for service in UK – eg advice in relation to
offshore investments
o Overseas travel booked in UK
o HMRC aware of back to back loan arrangements
o Private Eye article – Oct 13
12. Tip 6 – non-doms and IHT
o Inheritance tax charged on UK assets
o For UK doms charged on worldwide assets
o Non-doms become ‘deemed domiciled’ once
resident for 17/20 years
o (doesn't apply to Indian, Pakistani or French domiciled)
o Consider moving assets from personal to
trust/company ownership in year 16
13. Tip 7 – overseas workday relief
o Non-dom comes to UK
o For the rest of that tax year and two following:
o Income that relates to overseas work, paid AND retained
overseas, not subject to UK tax
o Calculated on a days worked basis
o HMRC check most day calculations
o HMRC checking not ‘ordinarily resident’ in year 3
o Less of an issue going forward because of SRT, but may
apply for 12/13 – get info sorted!
14. Tip 8 – watch losses
o Use of losses now restricted
o Capped at higher of £50k and 25% of income
o Sideways loss relief; carry back of losses; interest relief;
loss on unquoted company shares
o Doesn't apply to VCT/EIS/Gift aid
o If think there may be losses, need to plan
15. Tip 9 – Gift aid
o
o
o
o
Reduces tax
Can be carried back to prior year
Keeping records difficult!
If donations significant, consider personal charitable
trust
o If smaller, consider Charities Aid Foundation
o Gifts into both allowable, and easy to track!
o Need to watch restrictions (benefits received) and
sufficient income
