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Tax tips nov 2010
- 1. Top Ten Tax Tips Autumn Seminars 2010
- 2. Tax is taxing – take care Disclaimer: The contents of this presentation and handouts provide only an overview of the regulations in place at the time, and no action should be taken without consulting with the detailed legislation or taking professional advice. 2 www.piperhulse.com Piper Hulse - Accountancy & Business Advisory Tel: 01785 850 060
- 3. 3 www.piperhulse.com Piper Hulse - Accountancy & Business Advisory Tel: 01785 850 060 Tax Evasion
- 4. 4 www.piperhulse.com Piper Hulse - Accountancy & Business Advisory Tel: 01785 850 060 Tax Avoidance
- 5. 5 www.piperhulse.com Piper Hulse - Accountancy & Business Advisory Tel: 01785 850 060 #1: VAT – Flat Rate Scheme
- 6. 6 www.piperhulse.com Piper Hulse - Accountancy & Business Advisory Tel: 01785 850 060 VAT taxable turnover less than £150,000 to join Once in can stay in until it reaches £225,000 Charge VAT to customers at normal VAT rates Pay HMRC a flat % of revenue, different by trade e.g.; Range 4% to 14.5% Catering & restaurants 12.5% Management consultancy 14% Includes CAPEX – unless single items > £2k each No need to do VAT accounting on purchases and sales Good where purchase costs are low and predictable 1% reduction in first year of VAT registration See www.hmrc.gov.uk/vat #1: VAT – Flat Rate Scheme
- 7. 7 www.piperhulse.com Piper Hulse - Accountancy & Business Advisory Tel: 01785 850 060 #2: Business mileage
- 8. 8 www.piperhulse.com Piper Hulse - Accountancy & Business Advisory Tel: 01785 850 060 40p / mile for first 10,000 miles 25p / mile thereafter Must be valid business miles Can’t include to and from work If employer pays lower, the employee can claim the difference in their tax return Keep mileage records and diary / receipts #2: Business mileage
- 9. 9 www.piperhulse.com Piper Hulse - Accountancy & Business Advisory Tel: 01785 850 060 A business expense is any expenditure that is claimable through the business as long as it is a “wholly, exclusively and necessary” expense that was incurred by the business for its performance of day to day duties and there is no duality of purpose for mixed business and personal usage. #3: Expenses
- 10. 10 www.piperhulse.com Piper Hulse - Accountancy & Business Advisory Tel: 01785 850 060 Use of home for business – apportionment Professional fees – on approved HMRC list Pension & life insurance – take advice Health check & Eye test (VDU usage) Charitable donations Mobile phone http://www.hmrc.gov.uk/paye/exb/a-z/a/index.htm #3: Business expenses – a long list
- 11. 11 www.piperhulse.com Piper Hulse - Accountancy & Business Advisory Tel: 01785 850 060 #4: The ball & chain £6,475 each Transfers tax free Don’t forget IHT
- 12. 12 www.piperhulse.com Piper Hulse - Accountancy & Business Advisory Tel: 01785 850 060 #5: The chimney sweep £6,475 personal allowance 13 Year olds + <16 no National Minimum Wage 7am to 7pm only 2hrs Sunday But can’t send down the mine or put in the factory anymore! Check the rules
- 13. #5: Employing children If you are under compulsory school leaving age you can only be employed in certain permitted occupations: delivering newspapers, milk, groceries, foodstuffs, flowers or drapery goods office work, except in premises licensed for the sale of intoxicating liquor, betting or gaming hotel and catering work except in the kitchen or portions of premises licensed for the sale of intoxicating liquor work as a shop assistant, excluding any premises licensed for the sale of intoxicating liquor, betting or gaming domestic work light agricultural work or horticultural work for your parents. www.piperhulse.com Piper Hulse – Accountancy & Business Advisory Tel: 01785 850 060 13
- 14. 14 www.piperhulse.com Piper Hulse - Accountancy & Business Advisory Tel: 01785 850 060 Principal Private Residence relief (PPR) on the family home, whether the sole property or elected to be the main residence. #6: MP’s Flipper – Principal Private Residence
- 15. 15 www.piperhulse.com Piper Hulse - Accountancy & Business Advisory Tel: 01785 850 060 Certain periods are deemed to be occupation; Any non occupation in first yr due to building or renovation The last 3 yrs of ownership provided that at sometime the house has been the PPR Up to 4 years where the absence is due to employment elsewhere in the UK Any period where the absence is due to employment outside the UK If let the gain is apportioned between PPR and letting, with the latter qualifying for £40k letting relief #6: PPR conditions
- 16. 16 www.piperhulse.com Piper Hulse - Accountancy & Business Advisory Tel: 01785 850 060 20% Off for cash
- 17. 17 www.piperhulse.com Piper Hulse - Accountancy & Business Advisory Tel: 01785 850 060 #7 & #8: Incorporation & Dividends Example scenario, savings vary according to circumstances. * The NI rates quoted are the starting rates, they reduce as incomes increase
- 18. 18 www.piperhulse.com Piper Hulse - Accountancy & Business Advisory Tel: 01785 850 060 10% rate of Capital Gains Tax for qualifying sales Main rate = 18% or 28% (in take above income tax threshold) £5m lifetime limit Applies to Sole Trader, Partnerships & Ltd Companies Must own the business for the 12 months prior to the sale Available for associated disposals E.g. Sell Limited company & privately owned business property together in the same transaction #9: Entrepreneurs Relief
- 19. 19 www.piperhulse.com Piper Hulse - Accountancy & Business Advisory Tel: 01785 850 060 #10: ISAs ISA - £10,200 – Annual Limit per person £5,100 maximum for cash ISA Invested from post tax earnings Tax free one inside ISA (Income & CGT) Can transfer between fund managers and retain ISA status Can take money out when you like Can invest in a wide variety of investments
Editor's Notes
- -Tax in the UK is highly complex at it’s extremesThis presentation will give a selection of ideas, hopefully something for everyoneLike a GP, I don’t know it all and sometime’s I’ll need to get back to you or refer to a Consultant / Tax ManualsThis presentation will give you some tips, but they vary according to circumstancesDo your homework or take advicePlease raise any questions as we go along
- This is not the recommended approach!Tax Evasion is fraud and is illegalAccountants have a legal responsibility to disclose Wesley Snipes, turned himself in over the weekend, to begin a 3 year jail sentence for not paying his taxes or filing his tax returnsDoddy was tried for tax evasion in 1989 Trial revealed £336k in suitcase in attic – little in the bankFamous quote by his lawyer George Carman “Some accountants are comedians but comedians are rarely accountants”Amazingly he was acquitted!Becker – was charged for illegally claiming Non Dom status in Germany claiming he was a resident of Monaco
- Tax Avoidance is LegalThese are some of the more well known examplesIt’s about structuring your transactions in such a way to minimise taxSome might say that Lord Ashcroft strays into tax evasion!
- You have to register for VAT if your annual sales are over £70kThere are a number of different VAT schemes, the Flat Rate Scheme, is one that could save you moneyExample on screenBased on the new 20% VAT rate from 4th Jan 20111st = Management consultancy 14%2nd =Catering business 12.5%Thus worth considering, some things you need to know
- Approx 50 different tradesCAPEX - £2,000 (incl VAT) single items – can claim back the VATI’d suggest you create a simple spreadsheet working out VAT on purchases and sales and see if the FRS works for you
- Company cars are rarely better from a tax perspective these daysThe main exemption is a low CO2 car with high business mileageThe more expensive and less CO2 efficient cars are rarely better off as Company cars these days – I have a private carThis is a nice simple scheme40p first 10k25p after
- Unfortunately we can’t claim what the MP’s did!Andrew MacKay & Julie Kirkbride – Together claimed about £170k in allowances over 4 yearsKirkbride – London flat 2nd Home, Constituency home = Main homeMacKay – Vice versa!Margaret Moran. Labour MP for Luton South. This is her shabby Constituency Office in Luton against which she claimed expenses of about £149,000 for just one year! And a Grand Total of about £300,000 over three years!What we can claim is based on this overriding principal
- The list of rules as to what can and can’t be claimed is hundreds of pages longMost of them built up over time as Accountants look to exploit loopholes and HMRC try to close themSome examples are listedFollow the link for more information and to check the small print
- Simple principle really – if you’re married you can transfer assets to each other tax freeIf you have a business the spouse could earn a salary (providing it can be demonstrated that they are doing something)And they can participate in DividendsMake sure you’re comfortable as you’ll be handing over assets!
- We all have a tax allowance, including ChildrenThere are rules around employing ChildrenBut it is possible to employ them once they are 13 yrs old – but it must be real “e.g. Cleaning the office”
- You can read this at you leisureThe rules are common sense really to protect the Children
- MPs' avoided paying thousands of pounds in capital gains tax, which is payable on second homes, by re-classifying their 'second' property as their 'main‘ residence when they sell.Example: Labour Work and Pensions Secretary James Purnell - Declared his London flat was his second home to claim expenses. But when he sold it in 2004, he told the Inland Revenue it was his main home.It’s alleged that former Chancellor Alastair Darling flipped his second home 4 times during his time in parliament.
- I was at an Accountants meeting last week and one of the accountants for the rich and famous (who have may homes) claimed that they insisted that the 2nd home ad to be designated as their PPR for a little as 2 weeks and often this was not possible.Key word is employment IE. Excludes self employmentYou may need to prove residence
- This is tax Evasion & Illegal!
- We touched on this at last week’s new business seminarThe savings are all about NI and the lower Income tax rates on dividends more than offsetting the extra Capital Gains taxCan lead to big savings, so do your homeworkIf you are incorporating a pre existing business there could be additional savings on Incorporation. These arise because the company buys the business from you and could give rise to a Capital gain on which you’d pay a lower rate of tax than you would normally – this can get quite technical so If you’re thinking of it talk to your accountant to get it structured correctly.
- - Entrepreneurs relief reduces the rate of CGT on a sale of a business or associated disposal to 10%- The lifetime limit has increased from £1m to £5m over the past year-Most businesses will qualify- Take advice if you’re thinking of a sale to ensure that you qualify
- I’ll finish with one on Savings, as I like to remind people to put some money away for their old age!ISA’s are a tax efficient savings schemeWell worth considering a way to save for the future