Archive for September, 2013

Thinking of selling all or part of your business?

Thursday, September 26th, 2013

If you have spent your working life building your business, when you reach the point at which you are considering a sale, planning is critical.

VAT, corporation tax, income tax, stamp duty land tax, and capital gains tax are all standing in the wings waiting for you sign on the dotted line; so they can take a share of your hard-earned, sale proceeds.

Key areas that you will need to seek professional advice are:

• Do you need to strip surplus cash from your business prior to sale? What is the most tax effective way to do this?

• Are you selling all, or only part of your business? Do you need to consider demerging?

• If you are selling shares in your company will the sale benefit from Entrepreneurs’ Relief?

• Do you want to keep property owned by the business?

• If you have a group of companies would the group benefit from a formal reorganisation prior to sale?

• What impact will the sale have on any employee share options?

You may also need to consider that a potential buyer will be taking a close look at due diligence issues, particularly PAYE, VAT and corporation tax contingent risks.

In order to maximise the amount of post-tax sale proceeds you receive planning is absolutely key. We recommend that this be done before you instruct the selling agents and lawyers.

Payroll giving award for HMRC

Tuesday, September 24th, 2013

Payments that your employees make through a Payroll Giving Scheme are deducted from their pay before tax is deducted. This means that employees are given tax relief on their donation immediately – and at their highest rate of tax.

It's easy to set up a Payroll Giving Scheme for your business. There's little in the way of cost and administration, and you'll probably be able to adapt your existing payroll system to operate the scheme.

Figures recently published show that HMRC is the top Government department for payroll giving – almost 10,000 of its staff donate through their salary. In July, HMRC published figures for the UK that confirmed payroll giving had risen £4m since 2012 to £124m.

Charities benefit from this type of donation as tax relief at the donor’s highest rate is applied when the donation is made. Giving by direct debit and ticking the Gift Aid box effectively pegs tax benefits to the charity at basic rate only.

What is a salary sacrifice?

Thursday, September 19th, 2013

A salary sacrifice is a voluntary reduction in your salary in exchange for tax-free benefits. These benefits can include:

• Child care vouchers
• Cycle to work schemes
• Bus passes for commuters
• Canteen tokens
• Staff car parking and vouchers

The Government have also launched a consultation into the promotion of payroll giving. The aim is promote the system that allows monthly charitable donations to be taken from your salary before tax and National Insurance are deducted.

Ironically, the higher your income, and therefore your marginal tax rate, the less you will have to contribute to achieve the same result. For example:

1. If you pay income tax at 20%, and want to contribute £20 a month to a charity you would have approximately £16 stopped from your salary.
2. If you pay income tax at 40% and want to contribute £20 a month to a charity you would have approximately £12 stopped from your salary.
3. If you pay income tax at 45% and want to contribute £20 a month to a charity you would have approximately £11 stopped from your salary.
You could also use a salary sacrifice arrangement to reduce your taxable income if it seems likely that it will break through a significant tax threshold. For example:
• If your income is about to exceed £100,000 you will lose your personal tax allowance at the rate of £1 for every £2 your income exceeds £100,000.
• If your salary, or that of your partner, is about to exceed £50,000 you may lose entitlement to some or all of Child Benefit you may receive.
• You could also use salary sacrifice to keep your income below an increase in a tax band rate: from 20% to 40% or 40% to 45%.

It is important to crunch the numbers before you approach your employer so that you can quantify the benefits.

Landfill tax clarification

Tuesday, September 17th, 2013

HMRC have published draft guidance on landfill tax. Materials that can be classified as naturally occurring, and therefore taxable at the lower rate of £2.50, include:

“Group 1 of the 2011 Order allows the following waste materials to be lower rated: naturally occurring rock, clay, sand, gravel, sandstone, limestone, crushed stone china clay, construction stone, stone from the demolition of buildings or structures, slate, sub-soil, silt, and dredgings. Generally, these materials are formed by a natural process and are therefore naturally occurring.”

HMRC also states:

“Mechanical processing such as crushing or sorting does not in itself affect the 'naturally occurring' status. Therefore waste containing only naturally occurring group 1 materials that have been crushed or sorted are still 'naturally occurring'. However, chemical or thermal processing does affect the 'naturally occurring' status (but minerals that have been processed or prepared may qualify for the lower rate under Group 3 of the 2011 Order).”

Do you receive Child Benefit?

Thursday, September 12th, 2013

Many parents who receive Child Benefit may be blissfully unaware that they are walking into a tax trap.

From 7 January 2013 Child Benefit payments are effectively means tested by the tax system. If either parent, or both parents, has income in excess of £50,000, then part or all of the Child Benefit you have received after 7 January 2013 may be clawed back by the new High Income Child Benefit Charge (HICBC).

For every £100 your income exceeds £50,000, 1% of the Child Benefit you have received will be clawed back. Accordingly, if your income is in excess of £60,000, the benefit you may have received will be fully recovered by the HICBC. 

Apparently, over 400,000 people have opted out of receiving Child Benefit and they will be unaffected by the HICBC – you cannot be asked to repay what you have never received!

However, if you continued to receive Child Benefit after 1 January 2013, and if either you or your partner has income in excess of £50,000, then the HICBC will apply. This has implications for high income earners who do not normally submit a self assessment tax return.

You only have until 5 October 2013 to register for self assessment for the year to 5 April 2013. On the return you are required to state the amount of Child Benefit you received for the period 1 January 2013 to 5 April 2013. When your return is submitted, HMRC will work out the amount of the HICBC you need to pay and this will be collected through the self assessment system.

If both parents have income in excess of £50,000 then the highest earner will need to register for self assessment. If you prefer to avoid the HICBC, and registration for self assessment, you could always elect not to receive Child Benefit in future tax years.

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