Archive for April, 2022

Tax planning 2022-23

Thursday, April 28th, 2022

Planning to save tax may seem like a luxury buy in these days of rising prices and recovering from COVID fallout.

And yet tax planning is of real value in these uncertain times.

Whether your income and profits are increasing or reducing, there will be tax consequences. And unfortunately, to mitigate your tax footprint you will need to act in a timely manner. Wait too long and opportunities may be lost.

We are all entitled to use the present tax legislation to minimise our tax payments. What we are not entitled to do is evade tax by adopting strategies that stretch the credibility of laws set by parliament beyond those originally intended.

Penalties for engaging in tax schemes that would be challenged by HMRC as tax evasion can be punitive and in some cases are treated as fraud.

Tax planning achieves two major outcomes:

  • It reveals one-off tax saving opportunities, but it also reveals ongoing tax savings; savings that you will reap for many years with no further investment in professional advice.
  • Without straying into tax evasion, tax planning will also ensure you pay the minimum tax applicable to your circumstances, and no more…

HMRC are tax collectors. They are obliged to publish details of any tax savings options open to you, but under no obligation to tell you. A review of your personal and business circumstances is required to achieve this, and this is what tax planning advice will provide.

If you have concerns about your tax position in the coming tax year, 2022-23, pick up the phone. Let’s discuss your options in the round and see if an investment in tax planning would be of benefit.

Rising prices – inflation and the background

Tuesday, April 26th, 2022

We are all feeling the effects of inflation, increasing energy, fuel and the price of basic foodstuffs affect us all.

The Government Actuary’s Department has posted a blog article recently – Inflation, its personal – written by Christopher Ward, Actuary.

The article provides a useful update on the scope and cause of rising prices. It says:

“We are in a period of high inflation of prices for goods and services. The Office for National Statistics (ONS) shows one of the inflation indices has increased by 6.2% in the 12 months to March 2022.

“This is the highest that CPIH (Consumer Prices Index including owner occupiers' housing costs) has been since 1992. Among the main components of this increase are transport costs, such as petrol and diesel and the price of second-hand cars.

“During the pandemic prices for some goods and services fell, such as for eating out and holidays abroad. This reflected a rapid fall in demand which quickly shifted with demand gradually returning and supply then becoming challenging. Lockdown and workforce availability were key causes, but another factor was the reliance of so many products on semiconductors.”

This reference to the shortage of semiconductors is a real concern for manufacturers of consumer goods. The post continues:

“They [semiconductors] feature in ever more numbers of products such as computers, cars and even kettles. The demand for semiconductors has been outpacing supply.

“This has been compounded by other factors, such as the surge in early retirements during the pandemic and increasing energy prices due to the geopolitical situation.

“These factors and increasing semiconductor production can be managed with a view to bringing prices back down again. However, solutions such as building new semiconductor manufacturing facilities take time, so until then, prices will continue to increase.”

It is likely that inflationary pressures will continue to affect our personal financial position and our businesses for some time.

Readers who have concerns about the best way to manage these inflationary pressures are invited to call for an informal discussion.

Tax Opportunities at Milne Craig

Friday, April 22nd, 2022

As we continue to grow, vacancies have arisen for two new staff within the tax team.

1. Experienced Mixed or Corporate Tax Senior or Supervisor. Salary: Market Rate.

Our tax team is made up of around twenty staff with a variety of backgrounds. We are seeking to add a further experienced tax professional who is likely to either be a recently qualified tax specialist, or somebody without exam qualification but with a strong track record of tax compliance work. Staff in our tax team get to work in a nurturing and supportive environment with clients across a wide range of sectors and there is always plenty interesting tax work. It is essential for this role that the candidate has suitable corporation tax compliance experience and those without such experience should not apply for this role.

2. Trainee – Career in Tax. Salary: Market Rate, dependent upon candidate experience/qualifications.

We are keen to add another trainee in tax when the right candidate comes along. Whilst most of our trainees come from a graduate background, the quality of the individual and the likely fit within the team are more important than the prior qualification. Support towards ATT (and then CTA) membership through study and examination is offered with a support package tailored to fit with the particular trainee needs. It is a requirement that the candidate can evidence having both strong mathematical and reading skills for a career in tax work. For non-graduate applications this may be evidenced by recent work, or via good school exam results e.g. A or B in English and Maths at Higher level. For a graduate, a suitable degree at 2:1 or above is required.

Applications, with a cover email (or letter) and a current CV, should be emailed to donald.parbrook@milnecraig.co.uk

Please include all school exams sat whether passed or not, and the grade achieved.

Reorganising company structures to save tax

Thursday, April 21st, 2022

When corporation tax increases from 1 April 2023, companies will need to consider three scenarios:

From 1 April 2023:

  • The main corporation tax rate is increased to 25% where profits are over the upper profits limit, set at £250,000.
  • A small profits rate will apply for companies whose profits are equal or below the lower profits limit, set at £50,000. The small profits rate is set at 19%.
  • Companies with profits between the lower and upper limits (£50,000 and £250,000) will pay tax at the main rate of 25%, but this will be reduced by marginal relief. The effect of marginal relief is that the effective rate of corporation tax gradually increases from 19% where profits are £50,000 or less to 25% where profits are more than £250,000.

 

The limits are reduced if you have associated companies or if your accounting period is less than 12 months. This final comment is key.

A company with just one associated company – a company where there is common ownership – will see the upper and lower profits limits halved.

For example, if you have one associated company so that the limits are halved, from 1 April 2023, you will pay corporation tax at the small profits rate if your profits are £25,000 or less. If your profits fall between £25,000 and £125,000 you will pay tax at 25%, as reduced by marginal relief. If your profits are more than £125,000, you will pay corporation tax at the main rate of 25%.

 

Reviewing company structures

Business owners who control two or more companies could benefit from restructuring their business interests before 1 April 2023.

 

For example, if you have one company with taxable profits of £40,000 and one company with taxable profits of £5,000, the company with the taxable profits of £40,000 will not benefit from the small profits rate as the profits are above the lower limit of £25,000 that applies to a company with one associate. Merging the companies will mean that there is only one company and the combined profits of £45,000 will be charged at the small profits rate of 19%.

We can help

Restructuring, and considering your options in this way can take time. If you have an active share in more than one company the first job is to consider if your holdings constitute common ownership.

If they do, then consideration of the change in corporation tax rates will need to be undertaken to see if restructuring would be appropriate.

The value of objectivity

Wednesday, April 20th, 2022

Many business owners feel qualified to act on their subjective conclusions. Where these conclusions are key to the continuing success of the business this internal process opens up the possibility of failure – what if you have failed to consider all the possible risks?

As individuals, we can only grapple with our internal thought processes, we are doomed to be subjective. However qualified we may feel to make decisions, we should always be open to discovering what it is that we do not know, that we do not know…

And the best way to do this is to have trusted advisers or mentors, who can flag-up those ‘do not knows’ and in such a way that we avoid mistakes and enhance successes.

Setting boundaries

The best way to avoid making costly mistakes is to set up boundaries, what level of cost or investment or major change in your business activities should flag up the need to consult with third parties before ploughing ahead?

Having set these limits, for example, considering a financial investment above a certain amount, you would then approach your adviser with your ideas and ask for their opinion.

The choice to ignore their opinions is still yours to make, but this process should inject much needed objectivity into your decision-making processes.

Choosing advisers

Aside from your professional advisers, we all know respected individuals – for example, retired, successful businesspeople – who can open for debate issues that you may not have considered.

This would need to be a brief list. Otherwise, there is the risk that decisions will never be made, and opportunities will be missed.

Often, opening out the debate will enhance the outcomes rather than close down changes.

We can help

You will appreciate that we have acted for numerous businesses over a number of years and have witnessed a multitude of situations that have contributed to the success or failure of these businesses.

Hopefully, this places us in a unique position to be a useful sounding-board when you are faced with making critical decisions.

Do not hesitate. If you are about to make changes of whatever nature in your business in the near future, pick up the phone. We would be delighted to discuss your options.

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