High Clarity Accountants

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TAX TIP OF THE WEEK – Your company has accumulated significant profits and you looking for a tax-efficient way to use them.

One possible way would be to consider purchasing a share of the freehold in the trading property. This would be a more tax-efficient method to acquire a property as opposed to extracting a dividend and then buying a property in your own name. A further even more tax-efficient twist to this is by using the spare profits to make pension contributions and then using these funds to purchase the property. The advantage of this method is that the company will firstly get tax relief on the contributions used to purchase the property. In addition, your company can continue paying commercial

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TAX TIP OF THE WEEK – Your daughter wants you to pay for her driving lessons. Would getting your company to pay the £1000 cost be more tax efficient than paying for it personally?

As a director of your own company you are free to put any personal expenses through the company, however, it will come at a cost of benefit in kind taxes for you and the company. Therefore in most cases, it is best to first draw payments out as dividends and then pay for any personal items. However there is a more tax-efficient option, Why not put your daughter to work in the company and during any breaks she gets from her education? The company can then pay a salary through its payroll saving corporation tax and no personal tax. For

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TAX TIP OF THE WEEK – With the cost of living going up your employees may soon be hankering for a pay rise even if you think their performance doesn’t deserve one. A ‘Staff Suggestion Scheme’ could be the answer.

Once this is implemented, it will incentivise your team to develop ideas to improve your business, and any reward payments you make a FREE of tax and NI. You can pay up to £5k for a suggestion but there are some conditions and payment must be linked to the financial benefit for your business, which is the greater of: – 50% of the expected benefit in the first year or – 10% of the expected benefit over the next 5 years The financial benefit is just an estimate of what can be reasonably expected. As long as this is documented,

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TAX TIP OF THE WEEK – If you own a buy-to-let commercial property which has gone up in value meaning you will be facing a high CGT bill. Then you could take advantage of a loophole that may allow you to cut this drastically

Ordinarily, any gains made on the sale of the property would give rise to CGT. However where a property sale is included in the sale of a business then Business Asset Disposal Relief may apply. This would normally be apportioned to the time the asset has been used in a business. But if you are a sole trader then as long as the property has been used in your business for a period of 2 years then you can claim the relief in full regardless of how long it has been owned. This can be really handy if you own

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TAX TIP OF THE WEEK – Are you making the most of tax-free mileage allowances?

As you may be aware rates for using your own car for business purposes are 45p a mile for up to 10,000 miles & 25p thereafter. With fuel pricing going up daily the 25p rate is even unlikely to cover the fuel let alone the other running cost of the car. One way around this is to by splitting some of the work you do by creating a self-employment and then assigning a proportion of the mileage to that. For example, if you do 20000 miles a year, as a company director you would only be able to charge back

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TAX TIP OF THE WEEK – You may know that petrol/diesel company cars tend to work out quite expensive from a tax point of view. But what’s the position for Motorbikes/Scooters?

Motorbikes are classed as plant and machinery, not cars, which means: Benefit in Kind taxes are based on a lower rate than of a car meaning less personal tax The companies NI cost will be lower Full Corporation tax relief can be claimed in the 1st year VAT can be claimed on the cost where it would be restricted for cars All of this means for the example of 2nd hand car worth £4k personal tax cost could be £6k for a high rate taxpayer as it would be based on the list price The equivalent value motorbike would give

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TAX TIP OF THE WEEK – Thinking of investing In a new bike, could you get the company to pay?

The cost of a new bike these days can be quite a cost, especially if you are thinking of an e-bike which can run into £1000’s The good news is using the government’s cycle-to-work scheme you can purchase the bike through your company which means you will benefit from: Personal tax savings – as you will not need to extract money from your company before purchasing Corporation tax savings – which can be claimed under the capital allowances super deduction VAT – can be claimed back on the purchase price As an additional benefit, the above also applies to safety equipment

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TAX TIP OF THE WEEK -If you and your spouse sell a property that is jointly owned, how can you ensure you ensure you do so tax efficiently..

By default the ownership share is split equally between you and your spouse. As you are both taxed independently, this can mean an inefficient use of allowances and reliefs. For example, if you are a high rate taxpayer and your spouse doesn’t work, the sale will incur more tax at the higher rates. The good news is that you can if you want to change the ownership share you don’t necessarily have to go through the hassle of a formal transfer at the land registry. You can create a trust deed transferring a proportion of the beneficial interest in the

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TAX TIP OF THE WEEK – Are you planning a new business but are unsure of its viability. What’s the most tax-efficient way to proceed?

New ventures can often be risky a business and result in losses. The good news is that there are some fall-back tax positions that can help you claw back some of that money. For both trading as a limited company and sole trader, you can carry those losses forward against future profits. However in the case of a sole trader, there are two other advantages: Set off the losses against your other income in the year of the loss i.e. salary & dividends Carry back the losses to set of other income from the previous 3 tax years If you

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TAX TIP OF THE WEEK – Thinking of selling your business, but worried about finding a buyer and the capital gains tax? An EOT may be your answer.

There are a few problems that owners face when trying to sell their business: There may not be a ready market to sell to Buyers will most likely want to buy the assets rather than shares meaning you miss out on tax relief In these scenario’s it may be worth considering if your employees can take over ownership of the business in the form of an Employee Ownership Trust (EOT) Benefits are: A ready market for you to sell your shares The trust can take a loan to fund the purchase based on the business profits And best of all

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TAX TIP OF THE WEEK – Thinking of building a garden office, how could you benefit by getting your company to pay.

Since 2020 many business owners have realised that they can still operate effectively even from home. Meaning garden offices have become more popular. As a company director then there can be some benefits of getting your company to fund the new office: If your company is VAT registered then it will be able to recover the VAT paid on labour and material costs You will be able to get tax relief in the form of capital allowances for all plumbing, heating, electrics, and insulation You can claim further allowances against office furniture, equipment, storage, and other fittings. Personal taxes will

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TAX TIP OF THE WEEK – Are you looking to close or sell your company soon, then perhaps you could benefit from a redundancy package.

Employees (including directors) laid off due to a business being sold or closed down, can be entitled to statutory redundancy payments that are TAX FREE up to £30,000. The redundancy payment is calculated based on payroll wages, age and time worked for the business. This causes a problem for owner directors as they are most likely on a low salary/high dividend remuneration strategy. Meaning the amount they are entitled to will be minimal. The way around this is to include a contractual right redundancy pay in your employment contract, this would be based on all income from the company including

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TAX TIP OF THE WEEK – How to save stamp duty on a house purchase,

Given the average price of housing at the moment one of the biggest costs to moving or acquiring a buy-to-let investment is the stamp duty payable. If you are acquiring a 2nd property for say £500k the stamp duty alone would be an eye-watering £30k Wouldn’t it be great if you could reduce this, well you can with not too much effort by valuing the chattels A chattel is the household items that you will acquire as part of the purchase such as curtains, wardrobes, appliances, lighting, fittings etc If you could identify £10k worth of these items then this

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TAX TIP OF THE WEEK – Does owning a buy to let property through a company always save tax?

With the introduction of the S.24 mortgage interest relief restriction coming in a few years ago, the standard practice seems to be purchase any new buy-to-let via a Ltd co structure. However this isn’t always the best course of action, for example, if you were looking for a regular income from the rental profits then you will end up paying corporation tax as well as personal tax. So could actually be worse off than owning personally. If your intention is to accumulate any cash the property generates with a view to re-investing or as a retirement fund, then the company

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TAX TIP OF THE WEEK – Using your home for work? Don’t be off by some of the Myths out there claiming that a tax deduction will mean you lose the CGT exemption on your home.

One of the effects of the Covid pandemic meant that working from has become more common. For this reason, you may wish to claim some of the associated costs of gas, electricity etc against your business or employment income. However, you may have been told that using your home as an office will mean you lose the CGT exemption and will need to pay tax when you sell your home. The legislation states that if you use part of your home exclusively for business then you will lose the proportionate amount of the exemption. However, this can be easily avoided

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TAX TIP OF THE WEEK – Just purchased a holiday home?Make sure you take steps to minimise the eventual capital gains tax liability.

When you eventually sell your holiday home any gain made from property (sale – purchase price) is likely to be subject to CGT. However, you can use principal private residence (PPR) relief to mitigate some of these gains where you have a 2nd home. This is done by a process called an election,  whereby you notify HMRC which home is your main residence. The key is to do this in the first 2 years of ownership after which you can switch back to your main home. This will not only retain your main home PPR but also give you some

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TAX TIP OF THE WEEK – Had a fall out with your business partner and looking to split it, what is the most tax efficient way you can do this?

It’s an all too common scenario where friends start a business and all is well for a few years. After which they start having different ideas about the direction the business should take or concerns about who is contributing the most, so on… Now it could either be that one partner decides to buy the other out via share purchase. However, the difficulty can arise where they both want to carry on the business but separately. They could consider distributing the assets between them, but there can be difficulties valuing the assets and there is like to be a significant

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TAX TIP OF THE WEEK – Becoming VAT registered for the 1st time? Make sure you don’t miss out on reclaiming old VAT.

So you probably already know that once your business becomes VAT registered you can start reclaiming the VAT paid on purchases. However in addition you may also be able to recover VAT that was incurred months or even years ago. This falls into two categories: Goods/Equipment – you can claim the VAT back from the previous 4 years Services – you can claim the VAT back from the previous 6 months There is a condition though, the goods or services much not have been consumed or fully used by the registration date. Now you might think that rent and telephone

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TAX TIP OF THE WEEK – What is the best way to set up a new business venture which expects to make losses in the first year or two?

You might think that it is better to start a new company, as profits a generally taxed at lower rates than unincorporated businesses. However, where there are early-year losses the company can only carry these losses forward against future profits. And if the venture fails then any loss relief will have been lost In this scenario it may be better to operate as a sole trader or partnership. Losses in early years can then be used to reduce the tax paid from any other earnings you have ie salary or investments. If you don’t have other income in the same

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TAX TIP OF THE WEEK – Use a loan swap to get tax relief on your main mortgage interest

Ordinarily, the mortgage interest you pay on a home is not an allowable deduction against your income for tax purposes. However, if you have built up some value in your company over the years, then with a bit of re-structuring you could get tax relief on the mortgage interest. This would work as follows: 1. You sell your company shares to your wife so an amount ideally equivalent to your current mortgage 2. Your wife funds this purchase by extending the existing mortgage 3. You then use the money to pay off the original mortgage amount In effect, this will

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