Taxation is now a significant influence on personal and commercial financial decisions. Total UK taxes as a percentage of Gross Domestic Product are continuing to rise, with predictions of 37.5% of everything the UK generates going to the government. Business planning needs to include tax planning. The best option, ignoring taxes, may not be the best option after taxes.
There are many taxes to consider including such direct taxes as income tax, corporation tax, capital gains tax and of course, inheritance tax, which is effectively a tax on taxed income. National insurance is not a tax but contributes significantly to government tax revenues. Employees paid under PAYE are familiar with the 11% which is deducted from their gross pay for National Insurance contributions but few realise that their employer pays another 13.8% of their gross pay in addition to the employee National Insurance and tax deductions. The new pension arrangements under auto-enrolment are also not a tax but contributions are made by employees and employers.
After the taxes levied on incomes, personal expenditure suffers VAT, fuel tax, car tax, stamp duty land tax, council tax, business rates and many more. Relatively small companies or private investors can meet complex tax issues just with property investment. Commercial property may have an option to tax for VAT purposes. If the property is chargeable to VAT, tenants in common (two or more entities owning a specific share of a property), must register a partnership for VAT purposes even though no legal partnership exists. Stamp Duty Land Tax SDLT is now a significant factor in considering the cost of investment and there is increased complexity following changes to SDLT in recent years. There is the potential for capital gains tax (CGT) in the future if the property is sold and the CGT rate is different if held by individuals or a company. There are further tax considerations if the property is owned by an overseas entity.
Most importantly, HM Revenue and Customs do not offer advice or even interpretation of UK law. The risks associated with taxation continue to grow as the increasing complexity leads to ever more interpretations of one of the longest tax codes in the world, leaving taxpayers uncertain about their potential tax liabilities.
Here at Logicum we are ready to guide you through the processes which will be needed for you to execute your plan and consider both the commercial and tax aspects of any proposed venture. Whatever your plans, more than one tax is likely to be involved and we can assist with finding the best commercial and tax structure to meet your objectives. We advise on the tax implications for foreign companies coming to the UK and also where UK companies are setting up business abroad, including VAT on international transactions.
Tax is getting more complicated every year and there is simply more of it. There are wide ranging penalties for failing to comply with the law and even for late filing, including increasing use by HMRC of the powers contained in the Proceeds of Crime Act. It is virtually impossible to manage and expand a successful business without being fully tax compliant. Our tax services cover all types of tax returns for companies, partnerships, individuals, trusts and pension schemes. Tax return information is often taken from accounts and our accounts and tax compliance services are fully integrated.
Corporation tax is payable on company profits, adjusted for items allowable for tax purposes. The tax rate for the financial year commencing 1st April 2018 is 19%. Payment must be made within nine months of the company’s year end (or twenty one months from incorporation) and the Corporation Tax return must be filed within twelve months of the company’s year end. Where taxable profits exceed £1.5m in a twelve month accounting period, quarterly instalments are payable.
There is a corporation tax charge of 32.5% of directors’ loans taken from the company nine months after the year end if the loan has not been repaid by then. Companies pay corporation tax of gains. All UK companies are Liable to corporation tax (with some exceptions) including branches of overseas companies operating in UK and also certain overseas companies controlled from UK.
- Establishing whether corporation tax is chargeable.
- Planning for corporation taxes, forecasting potential liabilities and the timings for payment.
- Advising on corporation tax rules.
- Preparing tax computations and tax returns for filing with HMRC in the required electronic format. It is a requirement that all tax returns are filed electronically using Extensible Business Reporting Language (XBRL) which we have had in place since before the deadline for implementation (March 2011).
- Advising on the commercial and tax implications of proposed transactions, including property transactions and mergers and acquisitions.
- Advising on group structures including cross border groups with overseas subsidiaries or holding companies.
- Simple tax planning such as the use of dividends and the effect on income tax, the impact of benefits in kind and timing of capital expenditure.
- Mitigation of tax by available reliefs such as that for Research and Development.
Income tax is a direct tax on the income of individuals, payable on earnings from an employer (under a Pay as You Earn system – PAYE) or on earnings from self employment or partnership. It is also payable by certain trusts and on other income.
Everyone working in the UK is either paid under PAYE or taxed annually, needing a tax return or in many cases, both.
- If you are self employed your personal tax return will include your accounting information and we offer a fully integrated service with quoted fees, agreed and fixed in advance.
- We offer a fixed price personal tax return service including a review of your tax affairs. HMRC has admitted to many thousands of PAYE code mistakes and people are now receiving tax bills from years ago of which they were not aware. If you have received an unexpected tax bill, please get in touch.
- Many individuals working in the construction industry have tax deducted under CIS and are due to receive refunds of tax after the end of the 5th April tax year.
- Swift processing of tax refunds particularly for subcontractors in the construction industry.
VAT is one of the longest and most complex areas of taxation. Failure to comply with legislation which is complex and sometimes unclear carries the risk of heavy fines. We have identified some of the highest risk areas.
- Defining the rate: There is much detail on what is standard, zero, reduced rate or exempt supplies, which may be relevant to what can be reclaimed and leave VAT registered business accounting for partial exemption
- VAT on exports or imports is particularly complex and is subject to whether there are cross border transactions with EU or non EU countries. There are “place of supply” rules which mean you may have to register in the country to which you are exporting in certain circumstances. The rules are also separate for services and goods and returns may be required in respect of Intrastat and EC sales lists.
- VAT on property is complex too and for developers, there may be standard, zero or the reduced rate of 5% chargeable depending on detailed rules and the type of development or refurbishment. Residential developments with mixed use (i.e. commercial property on the ground floor of a tower) attract zero and standard rate charges.
- Transfer of going concern (TOGC) – where a business is sold. The rules are mandatory if the transaction falls within those rules.
- Simple compliance errors include failing to keep proper records. Smaller businesses tend to have credit card statement details but a VATA receipt of invoice is needed if VAT is to be reclaimed. VAT is not claimable on some expenses such as entertaining.
- Our Outsourcing service will assist with proper record keeping and we will keep you aware of any missing documentation so that VAT can properly be claimed. We prepare VAT returns and file online on your behalf.
- We can apply for VAT registration for you and deal with more complex registrations including partnerships and reclaiming VAT on property purchases.
- Our advisory services cover import and export within and outside the EU including assistance with export documentation.
- We manage VAT inspections on your behalf and liaise direct with HMRC.
- Our specialist advisors can assist with all aspects of VAT planning and complex VAT issues.
- We are particularly experienced with VAT on property, property developments and construction.
The self assessment regime means that HMRC can focus on tax returns and accounts which do not “fit” the industry sctor or show variations from past accounts. There are many was in which HMRC identify companies and individuals for tax enquiry. HMRC probably hold the largest and most up to date database of financial results by industry sector. Many enquiries just question one aspect of the accounts but this can lead to more questions.
We have considerable experience of handling enquiries as well as working with some of the leading tax advisers and Counsel in the UK.
Family businesses involving more than one generation have inheritance tax to consider and retiring members may wish to extract cash from the business tax efficiently. Good succession planning can enable family members to pass on more to their family and protect family assets against family disputes or divorce and even bankruptcy. Individuals who are retired with assets potentially liable to IHT can lose up to 40% of the value of the wealth they have created.
Restructuring of family companies and share ownership can provide a means of saving significant amounts of tax on realising capital from the business, substantially reducing the higher rate tax payable on salaries (under PAYE) and dividends.
Planning for a sale to a third party and making the most of tax allowances such as Entrepreneurs relief
If you have shareholders simply wishing to retire and sell their shares or even complex trust arrangements protecting family members we can assist you in planning to reduce the tax burden.
Individuals with assets liable to IHT do have options for sheltering the assets they have built over many years from taxed income. It depends on their circumstances. Please contact us for an informal discussion.