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Active Business Series - Tax and your Business - September 2012


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Active Business Series - Tax and your Business - September 2012

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Active Business Series - Tax and your Business - September 2012

  1. 1. ACTIVE PRACTICE UPDATES SEPTEMBER 2012Tax and your businessDon’t miss out on tax saving opportunities. Planning for the yearahead will beneit your business – this guide covers some importantconsiderations for unincorporated businesses.Sole traders and Business UPDATEpartnersTax is payable by an unincorporatedbusiness at income tax rates from 20 to the family wealth and income at risk if, before the end of the accounting year50 per cent. In addition there is a liability for example, the business were to fail. means you can claim any available taxto class 4 national insurance contributions HM Revenue & Customs may challenge relief a year earlier. For 2012/13 andwhich is charged or levied at a rate of 9 excessive remuneration packages or proit subsequent years, the irst £25,000 ofper cent on taxable proits from £7,605 to shares for family members, so seek our most capital expenditure qualiies for a£42,475 and thereafter at a rate of 2 per advice before you make any decisions. 100 per cent allowance. You may alsocent without limit. want to consider investing in energy If you operate your business through a eficient or environmentally beneicial plant limited company, under current tax lawThe family business you can pass shares on to other family and equipment which attracts 100 per cent allowances, irrespective of cost.You can employ family members in your members and thus gradually transfer thebusiness, provided the salary and other business with no immediate tax liability in most cases. However, a tax saving for Working from homebeneits you pay them are commerciallyjustiiable. You can remunerate family the donor usually impacts on the recipient The number of people working frommembers with a salary, and perhaps also and you need to steer clear of the anti- home has soared. According to awith beneits - such as a company car. avoidance rules known as the settlements report by Enterprise Nation, almost halfOther options include medical insurance or legislation, so again, seek our advice irst. of this country’s SMEs are based at amaking payments into a registered pension residential address, and 60 per centscheme. Expenses of new businesses start out of a home ofice. Frustratingly, the complex taxYou can also take family members into HMRC has extensive and ever-changing rules governing this situation mean fewpartnership, thereby gaining more lexibility regulations on what expenses can and are receiving the full beneit. Yet if youin proit allocation. In fact, taking your cannot be claimed against tax. Naturally, arrange your business affairs in a clearchildren into partnership and gradually you will want to make sure your business is and demonstrable way, you could claim areducing your own involvement can be a claiming all available expenses. number of expenses - depending on usage,very tax eficient way of passing on the area and working time, you can claim an Professional guidance can ensure yourfamily business. Be aware, though, that apportionment of both ixed and running business is making the right claims, andtaking family into your business may put costs. at the right time: incurring expenditure just18 Hyde Gardens BN21 4PT01323 431 200
  2. 2. Tax and your businessUtility bills, mortgage interest (or rent), whether announced or not, and they can mind that banks and other creditors oftenwater rates and general repairs may all also demand the production of documents require personal guarantees from directorsbe eligible, as are telephone line rental by any person involved in the supply of for company borrowings, so the owners orand cleaning. HMRC oficers are now goods and services. directors of the business may in fact bearinstructed to accept a claim on any the liabilities of the business out of their Although businesses subject to compliance personal assets.‘reasonable basis.’ Naturally, any such checks are selected on the basis of risk, itclaim should be diligently prepared. If you is essential that your records are adequate Trading through a limited company canare working from home and qualify, please if you are going to satisfy a tax inspection; be an effective way of sheltering proitstalk to us. You will also need to consider if you take reasonable care to comply as the rates of corporation tax on proitswhether your business use of home with the law you will not be penalised. are generally lower than those applying tobreaches planning restrictions, and whether If you are unsure if your business records unincorporated rates may be due on the property. will stand up to scrutiny, or would like more advice on what ‘Take care to avoid Although proits paid out in the formRewards and beneits a penalty’ means for you, do seek our of salaries, bonuses, or dividends will advice. Employers should be aware that normally be taxable at top rates (withThere are ways of rewarding staff that can there is now a penalty for failure to pay quite punitive amount of national insurancebe tax eficient for both your business and PAYE tax by the deadline each month. contributions in addition), proits retainedyour employees. For example, providing in the company will be taxed at 20 perchildcare vouchers of up to £55 per weekto staff as part of their salary package is Limiting personal cent. The tax rate increases signiicantly when taxable proits exceed £300, and attracts no national insurance liability Retained proits can be used to buycontributions, saving both your business equipment or to provide for pensions - bothand your employees money. This relief If the limitation of liability is an important of which are eligible for tax restricted to £28 a week for new consideration, then a limited companyparticipants paying 40 per cent tax, and may be the right solution - but do bear into £22 for new participants paying 50 percent tax.Do also consider whether some staff might Areas where we can help:be provided with a company car. Low • Managing debt and cash lowemission models can attract 100 per centallowances when the business purchases • Planning your business start-upthem brand new, and can produce a very • Your options for inancelow taxable beneit in kind for the staff • Finding investorsconcerned. Do ask us for more details • Putting you in touch with patent and intellectual property law specialistsof how to implement these ideas, or for • Helping you to comply with government regulations and avoid ines,alternative suggestions. surcharges, penalties and interestTax penalties • Timing capital and revenue expenditure to maximum tax advantage • Improving your invoicing and debt recovery systemsPenalties for inaccuracies in tax returns, • Involving family members in the businesslate iling of returns, late payment of taxand failing to register for certain taxes • Protecting your business from inancial disasterare all being modernised. Individuals and • Selling your business and grooming your business for sale,business owners now face up to 100 per • Valuing your businesscent penalty for deliberately underpaying • Minimising employer and employee NIC coststax and taking steps to conceal this, and • Minimising tax costs, enabling you to keep more of the proit you earneven higher penalties if the matter relates tonon UK income or assets. Even an honest • Preparing yourself and your business for your exit, succession or retirementmistake may be regarded as ‘careless’ andattract a penalty of up to 30 per cent ofthe tax. As your business and taxation advisers we aim to keep you up-to-date, but personal advice should alwaysHMRC also has wide ranging legal be sought before taking any action – we would bepowers, including rights of entry to all delighted to advise you on any taxation premises (including home ofices),