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A presentation given by MichelleAllen and Sarah Smith Wright Vigar   at the BizGen Conference and            Expo Lincoln
Tax Planning for SME’s Michelle Allen & Sarah Smith
“In this world nothing can besaid to be certain, exceptdeath and taxes"                    Benjamin Franklin
Tax Planning•   Simple or complicated•   Attitude to risk•   Cash•   Associated costs•   When?
Business•   Pre year end spending•   Pension contributions•   Asset purchases•   Property transactions•   Trading vehicle•...
Pre year End Spending•   Simple•   Timing•   Cash availability or finance•   General expenditure    – Marketing    – Train...
Pension Contributions•   Tax efficient•   Investment•   Remuneration•   Employer contributions – allowable•   Annual allow...
Asset Purchases• Vans, machinery• Full allowance in year of purchase• Annual Investment Allowance  – To 31/03/12 £100,000 ...
Property Transactions•   Buying or selling•   Improving/extending•   Maximum relief as capital allowances•   Capital - int...
Trading Vehicle• Now• Future• 3 main options  1. Unincorporated  2. Incorporated  3. LLP
Business Vehicle             Unincorporated•   Sole trader or partnership•   Flexibility with losses – carry back 3 years•...
Business Vehicle            Company• Tax rates  – Profit under £300,000 – 20%  – Profit over £1.5m – 26%  – In between – 2...
Business Vehicle                LLP• Limited Liability Partnership• Losses limited to capital introduced• Limited liabilit...
Unincorporated           vs Incorporated• Potential tax savings• Example:  – Anthony & Cleopatra make annual profits of   ...
Example (1)• 2011/12 Tax Rates• As Partners  – Taxed on profits  – Amount drawn is irrelevant  Income Tax          £20,020...
Example (2)• 2011/12 Tax Rates• As a Company  – Company pays corporation tax  – Individuals pay income tax and NI on earni...
Example - Comparison                                Partnership               CompanyIncome Tax                           ...
Unincorporated           vs Incorporated• What if individual is an additional rate tax  payer• Example:  – Anthony & Cleop...
Example (3)• 2011/12 Tax Rates• As Partners  – Taxed on profits  – Amount drawn is irrelevant  Income Tax          £156,00...
Example (4)• 2011/12 Tax Rates• As a Company  – Company pays corporation tax  – Individuals pay income tax and NI on earni...
Example - Comparison                                Partnership                CompanyIncome Tax                          ...
Summary• Tax saving – all profits extracted• Consider retaining profits  – Second scenario earnings restricted to    £100,...
VAT• Registration threshold - £73,000• Schemes  – Smooth cash flow  – Simplify administration• 3 Main schemes  1.Cash acco...
Personal• Capital Gains Tax  – Rates  – Entrepreneurs relief• Inheritance Tax• Pension Contributions• ISA
Capital Gains Tax• Rates  – 18%  – 28%• Entrepreneurs Relief  – 10%  – Lifetime limit £10m  – Business asset  – Rent
Inheritance Tax• Business Property Relief  – 100%  – 2 years minimum ownership  – 50%
Pension Contributions• Annual Allowance• Limits - £3,600 or qualifying income
ISA• Annual Investment Allowance  – Max £10,680 pa stocks & shares  – Max £5,340 pa cash only• Two separate ISAs only in o...
If you have any queries regarding issues raised duringthe seminar or any other taxation issues please contact Michelle All...
BizMidlands.co.uk
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Tax planning for sme's

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A guide to tax planning for SME's

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Transcript of "Tax planning for sme's"

  1. 1. A presentation given by MichelleAllen and Sarah Smith Wright Vigar at the BizGen Conference and Expo Lincoln
  2. 2. Tax Planning for SME’s Michelle Allen & Sarah Smith
  3. 3. “In this world nothing can besaid to be certain, exceptdeath and taxes" Benjamin Franklin
  4. 4. Tax Planning• Simple or complicated• Attitude to risk• Cash• Associated costs• When?
  5. 5. Business• Pre year end spending• Pension contributions• Asset purchases• Property transactions• Trading vehicle• VAT
  6. 6. Pre year End Spending• Simple• Timing• Cash availability or finance• General expenditure – Marketing – Training• Capital assets
  7. 7. Pension Contributions• Tax efficient• Investment• Remuneration• Employer contributions – allowable• Annual allowance - £50,000
  8. 8. Asset Purchases• Vans, machinery• Full allowance in year of purchase• Annual Investment Allowance – To 31/03/12 £100,000 – From 1/04/12 £ 25,000• Capital Allowances – To 31/03/12 20% & 10% – From 01/04/12 18% & 8%
  9. 9. Property Transactions• Buying or selling• Improving/extending• Maximum relief as capital allowances• Capital - integral features• Repairs• VAT
  10. 10. Trading Vehicle• Now• Future• 3 main options 1. Unincorporated 2. Incorporated 3. LLP
  11. 11. Business Vehicle Unincorporated• Sole trader or partnership• Flexibility with losses – carry back 3 years• Less cost• Easier to unwind• Potentially 40% and 50% tax
  12. 12. Business Vehicle Company• Tax rates – Profit under £300,000 – 20% – Profit over £1.5m – 26% – In between – 27.5%• Benefits lost on extraction
  13. 13. Business Vehicle LLP• Limited Liability Partnership• Losses limited to capital introduced• Limited liability – partners only liable to capital introduced• Accounts must be published• Potentially 40% and 50% tax
  14. 14. Unincorporated vs Incorporated• Potential tax savings• Example: – Anthony & Cleopatra make annual profits of £100,000 as a partnership – Year end is 31 March – Higher rate tax payers
  15. 15. Example (1)• 2011/12 Tax Rates• As Partners – Taxed on profits – Amount drawn is irrelevant Income Tax £20,020 NI £ 6,914 TOTAL £26,934
  16. 16. Example (2)• 2011/12 Tax Rates• As a Company – Company pays corporation tax – Individuals pay income tax and NI on earnings Corporation Tax £17,171 Income Tax £ Nil NI £ Nil Tax on Dividends £ 1,240 TOTAL £18,411
  17. 17. Example - Comparison Partnership CompanyIncome Tax 20,020 1,240National Insurance 6,914 NilCorporation Tax N/A 17,171TOTAL 26,934 18,411 • Additional tax paid if remain unincorporated £8,523
  18. 18. Unincorporated vs Incorporated• What if individual is an additional rate tax payer• Example: – Anthony & Cleopatra make annual profits of £400,000 – Year end is 31 March – Additional rate tax payers – Personal Allowance restricted
  19. 19. Example (3)• 2011/12 Tax Rates• As Partners – Taxed on profits – Amount drawn is irrelevant Income Tax £156,000 NI £ 12,914 TOTAL £168,914
  20. 20. Example (4)• 2011/12 Tax Rates• As a Company – Company pays corporation tax – Individuals pay income tax and NI on earnings Corporation Tax £ 83,610 Income Tax £ 2,828 NI £ Nil Tax on Dividends £ 67,990 TOTAL £154,428
  21. 21. Example - Comparison Partnership CompanyIncome Tax 156,000 70,818National Insurance 12,914 NilCorporation Tax N/A 83,610TOTAL 168,914 154,428 • Additional tax paid if remain unincorporated £14,486
  22. 22. Summary• Tax saving – all profits extracted• Consider retaining profits – Second scenario earnings restricted to £100,000 each. – Saving £30,726
  23. 23. VAT• Registration threshold - £73,000• Schemes – Smooth cash flow – Simplify administration• 3 Main schemes 1.Cash accounting – cash movement 2.Annual accounting – 1 return per year 3.Flat rate – % on sales
  24. 24. Personal• Capital Gains Tax – Rates – Entrepreneurs relief• Inheritance Tax• Pension Contributions• ISA
  25. 25. Capital Gains Tax• Rates – 18% – 28%• Entrepreneurs Relief – 10% – Lifetime limit £10m – Business asset – Rent
  26. 26. Inheritance Tax• Business Property Relief – 100% – 2 years minimum ownership – 50%
  27. 27. Pension Contributions• Annual Allowance• Limits - £3,600 or qualifying income
  28. 28. ISA• Annual Investment Allowance – Max £10,680 pa stocks & shares – Max £5,340 pa cash only• Two separate ISAs only in one year
  29. 29. If you have any queries regarding issues raised duringthe seminar or any other taxation issues please contact Michelle Allen – Newark Office Director Sarah Smith – Senior Manager Wright Vigar 15 Newland Lincoln LN1 1XG 01522 531341 action@wrightvigar.co.uk www.wrightvigar.co.uk
  30. 30. BizMidlands.co.uk
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