High Clarity Accountants

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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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TAX TIP OF THE WEEK – Sponsoring a local sports team can be a great way to give back to the community. In addition, there are also tax reliefs to be obtained, however, to avoid issues with the Taxman it is important to follow the correct steps..

So you have just helped your son’s football team with a sponsorship payment from your company. In the past HMRC have declined tax relief on these payments as they argued the reason was more of a personal donation than something that would benefit their business. To avoid this situation it is advisable to ask the sports club can set out in writing how your business can benefit from the payment, this could be: Names on shirts Advertising hoardings Access to special business events and local business owners Any other benefits that are likely to be provided This can also be

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TAX TIP OF THE WEEK – Made some good gains from Cryptocurrencies in the last few years? Great but have you considered the tax position when you eventually come to sell them?

Crypto is classified as an asset which means when you come to sell them you will be subject to capital gains tax. However, with a bit of year-end planning, this can be minimised. In years gone by you can use your annual CGT allowance to effectively sell assets such as shares and buy them back at the same price. However, a few years ago HMRC cottoned on to this and introduced so called Bed & Breakfasting rules. This means you had to wait for a period of 30 days before you could buy back the asset. The problem with is

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TAX TIP OF THE WEEK – Looking to sell your 2nd property but worried about capital gains tax?

In recent years house prices have gone through the roof and if you have owned the property for a decent amount of time then you will likely be facing a hefty CGT bill on sale. However with a bit of planning your liability could be reduced somewhat, here are a few options: If you are married and the property is in your name only, then you can transfer part of the property to your spouse. This doesn’t trigger any CGT and can be done just before the sale. By doing this you can use your spouse’s personal allowance to reduce

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TAX TIP OF THE WEEK – As a director of a Ltd Co could you benefit by also being a self-employed contractor to it?

Generally, any work you do for your Ltd and you are paid for will count as employment earnings or dividends. However, if say the work was sufficiently different to your normal duties (say giving the offices a lick of paint) and you negotiated the terms of the work with the other directors then any payment can be classed as self-employed income. So why bother, the self-employed income would also be taxed wouldn’t it? Yes, but the company would save on employers NI and you could reduce the tax by being able to claim any expenses incurred in completing the work.

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TAX TIP OF THE WEEK – Fancy getting away for the winter months to that new holiday home in Spain , could you do so tax efficiently?

You would love to buy that property, the problem is you don’t have that much in personal savings to stump up a deposit, as all your cash is sitting in your Ltd co bank account. Of course, you could draw this out as salary or dividends, but much of that cash would be lost to the taxman in the form of personal taxes. Instead, you could purchase it via your ltd company as a property investment, this would not only mean you avoid the personal taxes but the company can also claim the running costs as expenses. There will be

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TAX TIP OF THE WEEK – Are you planning to buy out your business partner and co-director in the near future? Make sure you do so tax efficiently

Are you planning to eventually buy out your business partner and co-director? Make sure you do so tax efficiently.. So you have agreed a fair price, the trouble is you now need to find the cash to pay them. Assuming you don’t have the spare funds lying around you may need to secure a loan to finance the purchase, however, this will mean servicing the loan will come out of post-taxed income. A more tax-efficient way of structuring this could be via a company buy-back. This is where the company uses its accumulated profits to pay off the outgoing director

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TAX TIP OF THE WEEK – Rather than considering a pay rise for your employees , consider a cheaper way for you to increase their pay via the use of tax-free travel expenses.

In order to cut the red tape for employers , HMRC let you use benchmark rates to cover employee travel and subsistence expenses: The daily rates are as follows: a) £5 – 5 hours or more traveling b) £10 – 10 hours or more c) £25 – 15 hours or more and is ongoing at 8pm As well as saving you admin time on reimbursing employees for their expenses you can use the rates to give a tax-efficient pay rise. For example, if one of your employees was on the road most days you could pay him around £2500 tax-free.

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TAX TIP OF THE WEEK – Ever considered getting a classic set of wheels to take advantage of the tax breaks

It is generally not recommended to purchase a petrol/diesel car through the company due benefit in kind charges that apply. These are based on the original list price and CO2 emissions of the vehicle meaning it can add up to a fair bit of personal tax. However, if you consider a classic car then you can slash this personal tax for the following reasons: – The original list price is likely to be must lower – The benefit in kind charge will be based on engine size rather than CO2 emissions An additional benefit if it is a genuine classic

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TAX TIP OF THE WEEK – Are you losing out further on money lost on shares, investments or properties recently. If so not following the correct process could cost you £££ of tax in future years.

So that stock that you thought was going to be the next Amazon but turned out to be a big flop which resulted in a loss on your investment. Well, not all might be lost as you can carry that loss forward indefinitely against any future gains that you make. This can be quite useful especially if you have a buy to let property which could give rise to a 28% tax rate on sale. However, it can be easy to miss out on this saving as HMRC requires you to notify them of the loss in the tax return

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TAX TIP OF THE WEEK – Looking to pass wealth on to your kids? Piling money into savings accounts while they are under 18 can have some unforeseen tax consequences, however, there is 1 type of gift that comes with tax perks.

There are 2 tax traps with just transferring money into their savings accounts: 1. Interest earned from these accounts (if more than £100/annum) couldn’t as your income, so you could end up paying tax on it. 2. Gifts of more than 3k per annum will count towards the annual exemption meaning it could be subject to inheritance tax. The way around this is to make gifts out of unused income, as long as it is regular & doesn’t impact your own normal standard of living it is outside of Inheritance tax. To get around the income tax trap you could

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TAX TIP OF THE WEEK – VAT savings for kids that learn a musical instrument

So your child has decided they want to learn the trumpet as part of their music lessons at school. As schools aren’t in the habit of buying instruments for pupils, they could help you save on the VAT element of this purchase. This is known as the assisted instrument purchase scheme (AIPS). The school will arrange the purchase of the instrument and as they can reclaim the VAT element can then in effect sell it on to you at the net price. Although this will save you one-sixth of the price there are some conditions in that they must take

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TAX TIP OF THE WEEK – Does your spouse have any unused personal allowances for the 21/22 tax year?

In situations where your husband/wife perhaps has a part-time job and didn’t earn more than £12500 marriage allowance may come in handy. Marriage allowance allows you to move up to £1250 of their allowance to you. Depending on how you have structured your earnings this can potentially save you up to £250. Also for any years gone by where a claim hasn’t been made all is not lost as you can make a backdated claim up to the 15/16 tax year. For more tax strategies download our 71 ways to save tax checklist https://bit.ly/2YQbhvr

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TAX TIP OF THE WEEK – Want to invest in a new business on the side but not sure how to fund it?

Putting money into a new company is nearly always risky, but doing it tax-efficiently means at least you will benefit in some way even it goes wrong. Here are a few of the options that have been summarised for you: Personal Investment – you could use your own money to buy shares in the new co.Pros – if you make a loss you can offset against CGTCons – you will only get a return if there is dividends available & the business wont get a tax deduction for the dividends Personal Loan – you could lend money to the companyPros

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TAX TIP OF THE WEEK – Can i get tax relief on customer meals?

TAX TIP OF THE WEEK – Can i get tax relief on customer meals?   Often, as business owners we will pay for meals or drinks on behalf of our customers to create new or cement existing customer relationships, so we see this as a necessary expense for the business. Unfortunately, HMRC class these costs as entertainment and therefore do not allow a deduction against income tax or VAT. A partial way around this is based on the fact that although entertainment isn’t allowed, subsistence costs are. As these are only limited to company employees what you could do is

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TAX TIP OF THE WEEK – Are entertainment costs ever tax-deductible?

TAX TIP OF THE WEEK – Are entertainment costs ever tax-deductible?    There is a fine line between promoting your business (tax deductable) to customers and providing entertainment to customers (not tax deductible).   However you don’t have to completely rule out a tax deduction when trying to impress customers with food and wine, the law states that where there is an exchange of some sort then this cannot be entertainment.    This exchange doesn’t have to be a monetary amount but could be in the form of a quick questionnaire or feedback survey that the customer completes. All you

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