tag:blogger.com,1999:blog-57386966374420280542024-03-14T10:44:04.154+00:00UK Tax PlanningA blog providing UK tax information and planning ideas from John Pointon, Accountant, Business and Tax Consultant.
Please send any suggestions for topics you would like to see covered to me at jpointon@gmail.com or 34 Lightley Court, Sandbach, Cheshire, CW11 4QA or phone 01270 763 466.Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.comBlogger111125tag:blogger.com,1999:blog-5738696637442028054.post-39162591452571509792012-06-02T12:09:00.000+01:002012-06-02T12:09:05.865+01:00Tax-Efficient Investment In UK Property For Non-Residents<span style="font-family: Verdana, sans-serif;"><br /></span><br />
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<span style="font-family: Verdana, sans-serif;">UK real estate, particularly prime property in London, has always attracted significant international investment. Now, as the UK property emerges from recession, there are renewed opportunities to benefit from significant capital growth and healthy rental streams.</span><br />
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<span style="font-family: Verdana, sans-serif;">Investment in UK real estate must be structured carefully to mitigate UK tax at source on income, gains and transactions. Taxes may be levied on rents, development profits and capital gains, and there also stamp taxes (see below) and inheritance taxes to consider.</span><br />
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<span style="background-color: white; font-family: Verdana, sans-serif;">I look at a number of common investment scenarios below, and particular structures which will help to shelter the investments from UK tax.</span></div>
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Individual purchase of one or more UK properties</span></h3>
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<span style="font-family: Verdana, sans-serif;">Many purchasers simply look to buy a single UK property to use as a base.</span><br />
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<span style="font-family: Verdana, sans-serif;">Others wish to develop a portfolio of properties under single ultimate ownership. Many of these properties will be rented on the open market.</span><br />
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<span style="font-family: Verdana, sans-serif;">It should be mentioned at the outset that a non-resident is not subject to UK tax on capital gains, even where derived from UK assets. This includes a non-resident individual, partnership or company. Investment properties can therefore be sold on at a gain in the future without tax considerations (although note below that there may be different treatment where a property is acquired, developed and sold on in a relatively short period of time).</span><br />
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<span style="font-family: Verdana, sans-serif;">A private use property will not be subject to any taxes on (deemed) income in the UK whilst the owners remain non-resident for UK tax purposes. On the other hand, profits deriving from UK rental receipts are taxable in the UK in all cases, on the following basis:</span></div>
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<li style="padding-bottom: 5px; padding-top: 5px;"><span style="font-family: Verdana, sans-serif;">Non-resident individual owner: at a rate of between 20% and 50% on income depending on the level of profits</span></li>
<li style="padding-bottom: 5px; padding-top: 5px;"><span style="font-family: Verdana, sans-serif;">UK resident company: 26% on income and gains</span></li>
<li style="padding-bottom: 5px; padding-top: 5px;"><span style="font-family: Verdana, sans-serif;">Non-resident company: 20% on income only.</span></li>
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<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;"> Clearly, it is preferable for the investment(s) to be made through a non-resident company, preferably in a low tax jurisdiction.</span><br />
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<span style="font-family: Verdana, sans-serif;">An overseas landlord is required to register with HMRC under the Non-Resident Landlord Scheme. Strictly, 20% tax must be withheld by the tenant or agent from net rents. However, approval can be obtained from HMRC for rents to paid gross, providing an annual tax return is filed and tax paid on time.</span><br />
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<span style="background-color: white; font-family: Verdana, sans-serif;">To reduce net rents chargeable to UK tax, it is often advisable for the shareholder to loan the company funds to purchase the property. Interest is then paid as an allowable deduction from rents. The loan should be secured on the property in order to obtain a maximum deduction on arm's length principles under the UK transfer pricing legislation. There must also be a commercial level of equity contribution and a suitable interest rate.</span><br />
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<span style="font-family: Verdana, sans-serif;">Planning should be undertaken to ensure the interest paid has a non-UK source, to avoid UK withholding tax.</span><br />
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<span style="font-family: Verdana, sans-serif;">In many cases the shareholder advancing the loan will be a second BVI company which will not be chargeable to tax on its interest receipts.</span><br />
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<span style="font-family: Verdana, sans-serif;">A further advantage in using a non-UK company is that it eliminates exposure to UK inheritance tax (IHT).</span><br />
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<span style="font-family: Verdana, sans-serif;">UK IHT is levied on all UK-situate assets on the death of the owner, regardless of residence or domicile status. </span><br />
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<span style="font-family: Verdana, sans-serif;">The tax is levied at a rate of 40% above a threshold value of £325,00 .</span><br />
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<span style="font-family: Verdana, sans-serif;"> By using a non-UK company (note the company must be incorporated outside the UK and its shares or register kept outside the UK, not merely a non-UK resident one) the assets comprised in the estate on death are then shares in the foreign company rather than the UK real estate. Such shares are exempt from IHT for a non-UK domiciliary.</span></div>
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<em><span style="font-family: Verdana, sans-serif; font-size: small;">Classic UK property ownership structure:</span></em></h3>
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Collective Investment Schemes for UK Real Estate</span></h3>
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<span style="font-family: Verdana, sans-serif;">Although there are many individual private investors in London real estate, a collective investment scheme or fund is often required to generate sufficient purchasing power and / or leverage. </span><br />
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<span style="font-family: Verdana, sans-serif;">As such they have become popular over the last ten years at both the public and private level.</span></div>
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Authorised Funds with Diversity of Ownership</span></h3>
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<span style="font-family: Verdana, sans-serif; font-size: small;"><b>REIT</b></span></div>
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<span style="font-family: Verdana, sans-serif;">At the public level, the UK introduced the Real Estate Investment Trust (REIT) in 2006.</span><br />
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<span style="font-family: Verdana, sans-serif;"> The REIT is a listed fund undertaking a property rental business. It is suitable for both personal and institutional investors. </span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">The advantage of a REIT is that income and gains are not taxed at REIT level, although withholding taxes often apply on distributions to investors and there is an annual requirement to distribute up to 90% of property income profits. </span><br />
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<span style="font-family: Verdana, sans-serif;">Due to the listing requirement a REIT is not suitable for structuring a private property fund.</span><br />
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<span style="font-family: Verdana, sans-serif;"><b>PAIF</b></span><br />
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<span style="font-family: Verdana, sans-serif;">As an alternative to the REIT, the Property Authorised Investment Fund (PAIF) was introduced to allow a tax-favoured property fund to be formed without a listing requirement. </span><br />
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<span style="font-family: Verdana, sans-serif;">The tax benefits are broadly similar to the REIT, but again withholding taxes will often be levied on distributions from the fund. </span><br />
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<span style="font-family: Verdana, sans-serif;">Despite the reduced scale of the PAIF, there is still a rigorous "diversity of ownership" requirement, meaning that smaller groups of investors will still not be able to benefit.</span></div>
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<em><span style="font-family: Verdana, sans-serif; font-size: small;">Authorised UK real estate fund:</span></em></h3>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiNFXcHTYzETp0O_El-hdVEiwgM_JYOyIb7f2lGz1vQVLFkx5IZevYgjLipyD7GaM8tNG70B4H8nIGFDkI1gg3_aNdppclNUynpE39zz09q7JOqoB5Bxpcfm1OXM8pssyC4gBlEL95MSuCg/s1600/157814b.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span style="font-family: Verdana, sans-serif;"><img border="0" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiNFXcHTYzETp0O_El-hdVEiwgM_JYOyIb7f2lGz1vQVLFkx5IZevYgjLipyD7GaM8tNG70B4H8nIGFDkI1gg3_aNdppclNUynpE39zz09q7JOqoB5Bxpcfm1OXM8pssyC4gBlEL95MSuCg/s320/157814b.jpg" width="260" /></span></a></div>
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Private Property Fund Vehicles</span></h3>
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<span style="font-family: Verdana, sans-serif;">As a result of these restrictions some have been active in developing non-UK based fund structures able to provide similar, or more extensive, tax advantages without the ownership restrictions placed on UK-based schemes.</span><br />
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<span style="font-family: Verdana, sans-serif;"><b>ICIS</b></span><br />
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<span style="font-family: Verdana, sans-serif;">In particular, the Cyprus Private Fund or ICIS is ideally suited as a private collective investment scheme for UK property. It combines the benefits of an EU-regulated fund which, when effectively structured, can achieve very low UK and overseas tax leakage.</span><br />
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<span style="font-family: Verdana, sans-serif;">Cyprus funds are a good on-shore alternative to the traditional unit trusts established in Jersey, Guernsey or the Isle of Man, or may be combined with a traditional tax-efficient offshore investment structure.</span><br />
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<span style="font-family: Verdana, sans-serif;">Carefully structured financing, in accordance with UK transfer pricing principles, can reduce the UK tax charge significantly, whilst the profits received in Cyprus as dividends are not subject to local taxes. </span><br />
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<span style="font-family: Verdana, sans-serif;">Dividends and / or interest can then be paid out to the ultimate investors free of Cypriot withholding tax.</span></div>
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<em><span style="font-family: Verdana, sans-serif; font-size: small;">Cyprus Private Fund for UK Rentals:</span></em></h3>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPOwiRKew6xsCQ0U_LJvwZpDzMKOdkgGCS-Nz-epeGKyNtuzfqLlZ3BoyzpEmpQqzvawlF5nfMA709DJGmiF9qCLJ90pz3IBrbmIfcTqhYME8WnFrn8YfZiqj5p1gbFV_sl882chAt6MSP/s1600/157814c.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span style="font-family: Verdana, sans-serif;"><img border="0" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPOwiRKew6xsCQ0U_LJvwZpDzMKOdkgGCS-Nz-epeGKyNtuzfqLlZ3BoyzpEmpQqzvawlF5nfMA709DJGmiF9qCLJ90pz3IBrbmIfcTqhYME8WnFrn8YfZiqj5p1gbFV_sl882chAt6MSP/s320/157814c.jpg" width="210" /></span></a></div>
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<em><span style="font-family: Verdana, sans-serif; font-size: small;">Simple Co-Ownership Structures</span></em></h3>
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<span style="font-family: Verdana, sans-serif;"> A group of investors looking to invest in a particular project may consider forming a UK Limited Partnership, typically where they are not looking to attract further funds in the future from other investors. </span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">Each partner contributes funds to the partnership and takes an interest in the underlying partnership assets and income as a limited partner. As a limited partner, liability is limited to the sum invested and undrawn profits.</span><br />
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<span style="font-family: Verdana, sans-serif;">The partnership is transparent for UK tax purposes so that only income (not gains) arising in the UK will be taxable on the members. </span><br />
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<span style="font-family: Verdana, sans-serif;">An unlimited partner, often an offshore company, is appointed to manage the assets but has no interest in underlying income or capital.</span><br />
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<span style="font-family: Verdana, sans-serif;">The advantage of a limited partnership structure is its flexibility, in that relations between partners are governed by a partnership agreement which can be altered at any time by agreement. </span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">The disadvantage is that the structure is relatively illiquid, unlike a fund where units or shares may be traded more easily. </span><br />
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<span style="font-family: Verdana, sans-serif;">Care must be taken in structuring borrowings to reduce the UK tax charge, as there are restrictions applicable to partnership structures.</span></div>
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<em><em><strong><span style="font-family: Verdana, sans-serif; font-size: small;">Limited Partnership Structure:</span></strong></em></em></h3>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhEHQOKQ8MmxKJgO0ocrOK7Tq_cYuXaR-MhqjdwTrw29pZ-JGWrhUGU11hX9fGl1uo2ZAtWL04e0lDC2d2fmWmn4G6bG6OQNZ4VeY6Z_guhkWThjwYquPb_-nwN7_Ey6o6TUzMgahi19dBn/s1600/157814d.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span style="font-family: Verdana, sans-serif;"><img border="0" height="297" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhEHQOKQ8MmxKJgO0ocrOK7Tq_cYuXaR-MhqjdwTrw29pZ-JGWrhUGU11hX9fGl1uo2ZAtWL04e0lDC2d2fmWmn4G6bG6OQNZ4VeY6Z_guhkWThjwYquPb_-nwN7_Ey6o6TUzMgahi19dBn/s320/157814d.jpg" width="320" /></span></a></div>
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Planning for UK Property Developments</span></h3>
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<span style="font-family: Verdana, sans-serif;">The UK property development market is picking up again and has been a popular investment choice for non-residents over the last 10 years.</span><br />
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<span style="font-family: Verdana, sans-serif;">Typically a site isacquired, developed and then sold on at a profit in a relatively short period of time. Such an activity is considered a trading activity in the UK, subject to income taxes on trading profits. As such the amount of tax at stake is often considerable and careful planning is required.</span><br />
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<span style="font-family: Verdana, sans-serif;"><b>Short Term Development (Under 12 months)</b></span><br />
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<span style="font-family: Verdana, sans-serif;">Short-term developments may avoid UK tax altogether when the developer is a company based in a jurisdiction with which the UK has a suitable tax treaty. </span><br />
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<span style="font-family: Verdana, sans-serif;">The treaty should state that a building site does not constitute a permanent establishment (PE) until the expiry of 12 months. </span><br />
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<span style="font-family: Verdana, sans-serif;">This has typically involved the use of companies in Jersey, Guernsey or the Isle of Man.</span><br />
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<b style="font-family: Verdana, sans-serif;">Long Term Development (Over 12 months)</b>
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<span style="font-family: Verdana, sans-serif;">Most developments last longer than 12 months and therefore a PE in the UK is unavoidable. </span><br />
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<span style="font-family: Verdana, sans-serif;">In such cases, planning can be undertaken to ensure that only profits directly attributable to the PE come into charge to UK tax. </span><br />
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<span style="font-family: Verdana, sans-serif;">With careful planning, significant pre-development profits, such as increases in value on securing planning permission, can be kept out of the UK tax net.</span><br />
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<span style="font-family: Verdana, sans-serif;">Such an offshore development vehicle is particularly attractive when combined with a Cyprus private fund, allowing a bespoke group of investors to collectively finance a development. </span><br />
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<span style="font-family: Verdana, sans-serif;">There will be no further tax on the dividends received in Cyprus from the Jersey company, as they derive from a trading activity</span></div>
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<em><em><strong><span style="font-family: Verdana, sans-serif; font-size: small;">UK Property Development Structure:</span></strong></em></em></h3>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiNVlOWxUsvImjas62CFAC1DxvKZeAyFfBh5DTu1amzidtfD3sLM0WrfaWU44pXjV7awbMkPqPop238NF49paonWQg_gZQcJ_KBbLimYk3JtzUHp7eJBvRQUBKvekvVgXi8Yt-EfXc69Odz/s1600/157814e.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span style="font-family: Verdana, sans-serif;"><img border="0" height="287" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiNVlOWxUsvImjas62CFAC1DxvKZeAyFfBh5DTu1amzidtfD3sLM0WrfaWU44pXjV7awbMkPqPop238NF49paonWQg_gZQcJ_KBbLimYk3JtzUHp7eJBvRQUBKvekvVgXi8Yt-EfXc69Odz/s320/157814e.jpg" width="320" /></span></a></div>
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Summary</span></h3>
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<span style="font-family: Verdana, sans-serif;">UK real estate continues to represent an excellent investment opportunity for nonresidents. Structured carefully, the UK and international tax leakage can be minimised. There are also opportunities for collective investment in UK property within tax-efficient structures.</span><br />
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<span style="font-family: Verdana, sans-serif;"><b>Note on Stamp Duty Land Tax</b></span><br />
<span style="font-family: Verdana, sans-serif;"><b>(This note is not exhaustive and appropriate professional advice should be taken before entering into transactions.)</b></span><br />
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<span style="font-family: Verdana, sans-serif;"><b>Stamp Duty Land Tax rates and thresholds</b><br /><br />Stamp Duty Land Tax (SDLT) is charged on land and and property transactions in the UK.</span><br />
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<span style="font-family: Verdana, sans-serif;">The tax is charged at different rates and has different thresholds for different types of property and different values of transaction.<br /><br />The tax rate and payment threshold can vary according to whether the property is in residential or non-residential use, and whether it is a freehold or leasehold. </span><br />
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<span style="font-family: Verdana, sans-serif;">SDLT relief is available for certain kinds of property or transaction.<br /><br /><b>SDLT rates for residential property</b><br />The table below applies for all freehold residential purchases and transfers and the premium paid for a new lease or the assignment of an existing lease. (If the property will be used for both residential and non-residential purposes the rates differ - please see the section 'SDLT for non-residential or mixed use property').</span><br />
<span style="font-family: Verdana, sans-serif;"><br /><b>New leases</b><br /><br />If the transaction involves the purchase of a new lease with a substantial rent there may be an additional SDLT charge to that shown below, based on the rent.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /><b>Residential land or property SDLT rates and thresholds</b><br /><br /><br /><b>Purchase price/lease premium or transfer value </b><b>SDLT rate</b><br /><br />Up to £125,000 Zero<br /><br /><br />Over £125,000 to £250,000 1%<br /><br /><br />Over £250,000 to £500,000 3%<br /><br /><br />Over £500,000 to £1 million 4%<br /><br /><br />Over £1 million to £2 million 5%</span><br />
<span style="font-family: Verdana, sans-serif;"><br />Over £2 million from 22 March 2012 7%<br />Over £2 million </span><span style="background-color: white; font-family: Verdana, sans-serif;">from 21 March 2012</span><br />
<span style="font-family: Verdana, sans-serif;">(purchased by cer</span><span style="background-color: white; font-family: Verdana, sans-serif;">tain persons</span><br />
<span style="background-color: white; font-family: Verdana, sans-serif;"> including corporate bodies) 15%</span><br />
<span style="font-family: Verdana, sans-serif;"><br /><br />If the value is above the payment threshold, SDLT is charged at the appropriate rate on the whole of the amount paid. </span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">For example, a house bought for £130,000 is charged at 1 per cent, so £1,300 must be paid in SDLT.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">A house bought for £350,000 is charged at 3 per cent, so SDLT of £10,500 is payable.<br />£2 million threshold for wholly residential property<br /><br />From 22 March 2012 SDLT on residential properties over £2 million is charged at 7 per cent </span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">It does not apply to non-residential or mixed-use properties.<br /><br />If you exchanged contracts before the higher rate came into force on 22 March 2012) the 5 per cent rate will apply. </span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">This only applies where the contract is unconditional and unaltered on or after 21 March 2012.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /><b>Higher rate for corporate bodies</b><br /><br />From 21 March 2012 SDLT is charged at 15 per cent on interests in residential dwellings costing more than £2 million purchased by certain non-natural persons.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">This broadly includes bodies corporate, for example companies, collective investment schemes and all partnerships with one or more members who are either a body corporate or a collective investment scheme. </span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">There are exclusions for companies acting in their capacity as trustees for a settlement and property developers who meet certain conditions.<br /><br />If you exchanged contracts before the higher rate charge came into force on 21 March 2012, the 5 per cent rate will apply. This only applies where the contract is unconditional and unaltered on or after 21 March 2012.</span><br />
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<span style="font-family: Verdana, sans-serif;"><br /><b><br />SDLT rates for non-residential or mixed use properties</b><br /><br />Non-residential property includes:</span><br />
<ul>
<li><span style="font-family: Verdana, sans-serif;"><span style="background-color: white;">commercial property such as shops or offices</span></span></li>
<li><span style="font-family: Verdana, sans-serif;"><span style="background-color: white;">agricultural land</span></span></li>
<li><span style="font-family: Verdana, sans-serif;"><span style="background-color: white;">forests</span></span></li>
<li><span style="font-family: Verdana, sans-serif;"><span style="background-color: white;">any other land or property which is not used as a dwelling</span></span></li>
<li><span style="font-family: Verdana, sans-serif;"><span style="background-color: white;">six or more residential properties bought in a single transaction</span></span></li>
</ul>
<span style="font-family: Verdana, sans-serif;"><br />A mixed use property is one that incorporates both residential and non-residential elements.<br /><br />The table below applies for freehold and leasehold non-residential and mixed use purchases and transfers<br /><br />If the transaction involves the purchase of a new lease with a substantial annual rent, there may be additional SDLT charge to that shown below, based on the rent. </span><br />
<span style="font-family: Verdana, sans-serif;"><br /><b>Non-residential land or property rates and thresholds</b><br /><br /><b>Purchase price/lease premium or transfer value (non-residential or mixed use) SDLT rate</b><br />Up to £150,000</span><br />
<span style="font-family: Verdana, sans-serif;"> - annual rent is under £1,000 Zero<br /><br /><br />Up to £150,000 </span><br />
<span style="font-family: Verdana, sans-serif;">- annual rent is £1,000 or more 1%<br /><br /><br />Over £150,000 to £250,000 1%<br /><br /><br />Over £250,000 to £500,000 3%<br /><br /><br />Over £500,000 4%<br /><br /><br />Note that for the above purpose the annual rent is the highest annual rent known to be payable in any year of the lease.</span></div>
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<span style="font-family: Verdana, sans-serif;"><br /></span></div>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com12 Lightley Ct, Sandbach, Cheshire East CW11 4QA, UK53.1335482 -2.37332553.1311797 -2.3782389999999998 53.1359167 -2.368411tag:blogger.com,1999:blog-5738696637442028054.post-56869681361644966452012-06-01T17:14:00.000+01:002012-06-01T17:14:26.464+01:00Annual Investment Allowance<span class="Apple-style-span" style="color: #3f3f3f; font-family: Arial, Helvetica, sans-serif; font-size: 13px; line-height: 20px;"></span><br />
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<span class="Apple-style-span" style="color: #3f3f3f; font-family: Verdana, sans-serif; font-size: 13px; line-height: 20px;">The annual investment allowance (AIA) provides 100% tax relief on qualifying expenditure on plant and machinery - not cars - up to the maximum allowance available for each accounting period - for expenditure used in a trade or profession.</span></div>
<span style="font-family: Verdana, sans-serif; font-size: x-small;"><span style="line-height: 20px;"><br /></span></span><br />
<span style="font-size: 13px; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;">The AIA is a capital allowance, an amount you can write off against taxable profits for purchases of qualifying plant and equipment; not cars.</span></span><br />
<span style="font-size: 13px; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;"><br /></span></span><br />
<span style="font-size: 13px; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;">It is available alike to sole traders, partnerships and companies although some restrictions apply to companies in groups or those closely related to each other. It is not available to "mixed partnerships": where one or more of the partners are a company </span></span></div>
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<h2>
<span class="Apple-style-span" style="color: #3f3f3f; font-family: Verdana, sans-serif; font-size: 13px; line-height: 20px;">What counts as plant and machinery for AIA? </span></h2>
<br />
<ul style="font-size: 12px; font-weight: inherit;">
<li><span style="font-size: 13px; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;">Machinery;</span></span></li>
<li><span style="font-size: 13px; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;">Large Tools (small tools are usually written off as consumables);</span></span></li>
<li><span style="font-size: 13px; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;">Furniture;</span></span></li>
<li><span style="font-size: 13px; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;">Electrical equipment (televisions, radios, kettles, vacuum cleaners etc);</span></span></li>
<li><span style="font-size: 13px; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;">Computers, printers;</span></span></li>
<li><span style="font-size: 13px; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;">Telephones and telecommunication equipment;</span></span></li>
<li><span style="font-size: 13px; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;">Other office equipment;</span></span></li>
<li><span style="font-size: 13px; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;">Vans and other commercial vehicles;</span></span></li>
<li><span style="font-size: 13px; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;">Fixtures and Fittings;</span></span></li>
<li><span style="font-size: 13px; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;">Computer software with a life of more than two years.</span></span></li>
</ul>
<div style="font-weight: inherit;">
<span style="font-family: Verdana, sans-serif; font-size: x-small;"><span style="line-height: 20px;">What is the maximum AIA available?</span></span></div>
<div style="font-weight: inherit;">
<span style="font-family: Verdana, sans-serif; font-size: x-small;"><span style="line-height: 20px;"><br /></span></span></div>
<div style="font-weight: inherit;">
<span style="font-size: x-small; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;">The maximum AIA available depends on the accounting period of the business and its structure;</span></span></div>
<h3>
<span style="font-size: x-small; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;">Companies</span></span></h3>
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<span style="font-size: x-small; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;">Accounting periods falling into the period:</span></span></div>
<div style="font-weight: inherit;">
<ul>
<li><span style="font-size: x-small; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;">1 April 2008-31 March 2010 £50,000</span></span></li>
<li><span style="font-size: x-small; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;">1 April 2010-31 March 2012 £100,000</span></span></li>
<li><span style="font-size: x-small; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;">1 April 2012 onwards £25,000</span></span></li>
</ul>
</div>
<div style="font-weight: inherit;">
<span style="font-size: x-small; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<h3>
<span style="font-size: x-small; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;">Other Businesses</span></span></h3>
<div style="font-weight: inherit;">
<div>
<span style="font-size: x-small; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;">Accounting periods falling into the period:</span></span></div>
<div>
<ul>
<li><span style="font-size: x-small; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;">6 April 2008-5 April 2010 £50,000</span></span></li>
<li><span style="font-size: x-small; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;">6 April 2010-5 April 2012 £100,000</span></span></li>
<li><span style="font-family: Verdana, sans-serif;"><span style="font-size: x-small; font-style: inherit; line-height: 20px;">6 April 2012 onwards </span><span style="font-size: x-small; font-style: inherit; line-height: 20px;"> £25,000</span></span></li>
</ul>
</div>
</div>
<div style="font-weight: inherit;">
<span style="font-size: x-small; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;">The AIA is also restricted if the accounting period is less than 12 months and transitional rules apply to accounting periods straddling 1 or 6 April 2012.</span></span></div>
<div style="font-weight: inherit;">
<span style="font-size: x-small; font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<br />
<h3>
<strong style="font-style: inherit; line-height: 20px;"><span style="font-family: Verdana, sans-serif; font-size: large;">Bonus for self-employed businesses.</span></strong></h3>
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Profitable self-employed business owners face an additional 50% income tax charge on earnings in excess of £150,000. Judicious use of the AIA can have considerable benefits.</div>
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Consider a self-employed trader with taxable profits after all deductions, but before claims for capital allowances, of £200,000.</div>
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The 50% income tax charge, not the total tax charge, would be £25,000. (£200,000 - £150,000 at 50%) If the trader spent £25,000 on qualifying plant or equipment, that qualified for the AIA, he or she could write off the £25,000 against the £200,000 profits and half the 50% rate income tax charge would be eliminated! A tax saving of £12,500.</div>
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In cash terms that represents a 50% recovery of the £25,000 investment in the new plant or equipment.</div>
</span><br />Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com2 Lightley Ct, Sandbach, Cheshire East CW11 4QA, UK53.1335482 -2.37332553.1311797 -2.3782605 53.1359167 -2.3683894999999997tag:blogger.com,1999:blog-5738696637442028054.post-5663040795294093492012-06-01T02:12:00.000+01:002012-06-01T02:12:14.308+01:00Lobbying does pay!<br />
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<span style="font-family: Verdana, sans-serif;">In the past few days some national newspapers have been crowing about the part they and their readers played in getting the Government to back down on certain tax proposals.</span></div>
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<span style="font-family: Verdana, sans-serif;">This week the Government changed its mind about some of the VAT changes announced in the March Budget speech.</span></div>
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<span style="font-family: Verdana, sans-serif;">1) The much derided so called ‘pasty tax’ rules have been revised to remove certain hot foods from the threat of VAT increases. For those involved in selling takeaway food it will now be necessary to pay close heed to the rules as they progress to the statute book to see what will and will not be affected by the changes.</span></div>
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<span style="font-family: Verdana, sans-serif;">2) There was also a ‘U-turn’ with regard to the proposed imposition of a 20% VAT liability on static caravans which has now been revised to 5%.</span></div>
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<span style="font-family: Verdana, sans-serif;">3) The £30 million the Government will contribute to a fund for churches to call on to help ease the burden of the VAT changes for alterations to listed buildings is argued by some to have also been as a result of fierce lobbying.</span></div>
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<span style="font-family: Verdana, sans-serif;">4) We will have to see whether the major concerns voiced by the charitable sector, with regard to the proposed ‘relief capping’ rules, will be encompassed in the consultation documentation we hope to see over the summer.</span></div>
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<span style="font-family: Verdana, sans-serif;">These developments raise two issues: lobbying can seemingly pay off; and the tax rules, proposed and existing, can change in an instant with the result that it always pays to be up to date with proactive input from all your professional advisers.</span></div>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com0Lightley Ct, Sandbach, Cheshire East CW11 4QA, UK53.1335482 -2.37332553.1311667 -2.3782605 53.1359297 -2.3683894999999997tag:blogger.com,1999:blog-5738696637442028054.post-4824506254129510582012-05-27T04:54:00.000+01:002012-05-27T04:54:09.744+01:00How much of my use of home as office can I set against tax?<br />
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With the recession, many people have become self-employed in the past couple of years.</div>
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Many of these start-ups have begun in bedrooms and study rooms.</div>
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Other, successful businesses are still being carried out from home after several years' trading.</div>
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H M Revenue & Customs (HMRC) provide a tax deduction for those who do not rent office space, or who rent office space and also carry out some business at home at the same time.</div>
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If the work carried out at home is a small proportion of the whole business activities, such as compiling the paperwork for the accountant or the bookkeeper or making some business phone calls in the evening and weekends, HMRC allow a reasonable estimate without having to provide much detail on the basis of the estimate.</div>
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However, if the business has all or the majority of the work being carried out at home, there is a rule tto be adhered to for an expense to be considered allowable for tax purposes.</div>
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The rule is that the expense must be ‘wholly and exclusively for the purpose of the trade’.</div>
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This does not mean that certain expenses, such as rent and utility costs, cannot be considered as business expenses because they are not wholly and exclusive to the business. In these cases, apportionment is required.</div>
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Factors to consider when apportioning costs such as utility bills are:</div>
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1. How much of the home is being used for business, is it one room in the house or a specific area of an open plan house?</div>
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2. For how long is this area in the house being used for business, is it 7 working hours like in an office, or more or less?</div>
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3. Can you separately measure the use of the utility or the rent? Sometimes if there is a meter, this can be simply measured.</div>
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Fixed costs, such as rent, mortgage payments, home insurance and council tax are allowable subject to certain criteria.</div>
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Rent and council tax can be apportioned according to the above factors, the apportioned business use is then not considered to be income for the individual.</div>
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Only the apportioned interest element of the mortgage payments are allowed. The capital element of the repayment is not allowable..</div>
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If the business requires separate trade insurance distinct from the home insurance, the home insurance is not an allowable expense as the seperate business expense is wholly allowed. If there isn’t separate business insurance then the home insurance is apportioned. </div>
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An apportionment of repair costs to the whole property is allowed. However if the whole house apart from the room/area used for business is redecorated then this cost is not allowed for business purposes, likewise, if only the room/area used for business is redecorated then the whole of this cost is allowable for business.</div>
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Various other running costs can be apportioned. However, the apportionment will differ according to the specific trade. For example, if a business uses alot of electricity to carry out its trade then the apportionment of the electricity bill will be more business use than personal use. Similarly, the water charges may be apportioned so there is more personal use than business use.</div>
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<span class="tags" style="background-color: white; border: 0px; color: #999999; font-family: 'Helvetica Neue', arial, sans-serif; font-size: 12px; line-height: 21px; margin: 0px 0px 10px; outline: 0px; padding: 0px; vertical-align: baseline;">Tags: <a href="http://www.accountantsworld.co.uk/tag/business-expense/" rel="tag" style="background-color: transparent; border: 0px; color: #497ea8; margin: 0px; outline: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">business expense</a>, <a href="http://www.accountantsworld.co.uk/tag/home-office/" rel="tag" style="background-color: transparent; border: 0px; color: #497ea8; margin: 0px; outline: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">home office</a>, <a href="http://www.accountantsworld.co.uk/tag/use-of-home/" rel="tag" style="background-color: transparent; border: 0px; color: #497ea8; margin: 0px; outline: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">use of home</a></span>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com0Lightley Ct, Sandbach, Cheshire East CW11 4QA, UK53.1335482 -2.37332553.1311667 -2.3782605 53.1359297 -2.3683894999999997tag:blogger.com,1999:blog-5738696637442028054.post-15566177379467523762012-02-09T13:24:00.000+00:002012-02-09T13:24:22.209+00:00Salary sacrifices revisited<span style="font-family: Verdana, sans-serif;"><span style="background-color: white; color: #222222;">The tax and NIC savings of salary sacrifices have grown in popularity as benefits providers have increased their products. </span></span><br />
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<span style="font-family: Verdana, sans-serif;"><span style="background-color: white; color: #222222;">Two recent cases underscore some key points to remember to operate a "safe" salary sacrifice arrangement. </span></span><br />
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<span style="font-family: Verdana, sans-serif;"><span style="color: blue; font-size: large;"><b>Case 1 </b></span><span style="background-color: white; color: #222222;">(</span></span><span style="background-color: #f3f4f8; color: #444444; font-family: Verdana, sans-serif; font-size: 11px; text-align: left;"> </span><b style="background-color: white; color: #444444; font-family: Verdana, sans-serif; text-align: left;">Reed Employment Plc v The Commissioners for HM Revenue and Customs</b><span style="font-family: Verdana, sans-serif;"> - available to download </span><span style="color: black;"><a href="http://www.financeandtaxtribunals.gov.uk/judgmentfiles/j6100/TC01727.pdf" style="font-family: Verdana, sans-serif;" target="_blank">here </a><span style="font-family: Verdana, sans-serif;"> .</span><span style="font-family: Verdana, sans-serif;"> )</span></span><br />
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<span style="background-color: white; font-family: Verdana, sans-serif; text-align: left;">You should use the case to review your current salary sacrifice arrangements, making sure they are robust, but also consider additional areas where salary sacrifice could now be introduced with confidence.</span>
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<span style="background-color: white;"><span style="font-family: Verdana, sans-serif; text-align: left;">The recent decision in the First-tier Tribunal (FTT) case of</span><span style="font-family: Verdana, sans-serif; text-align: left;"> </span><em style="font-family: Verdana, sans-serif; text-align: left;">Reed Employment plc (and other Reed Group companies) v The Commissioners for HM Revenue and Customs </em><span style="font-family: Verdana, sans-serif; text-align: left;">has now been issued.</span><span style="font-family: Verdana, sans-serif; text-align: left;"> </span><span style="font-family: Verdana, sans-serif; text-align: left;">The case considered the employment tax treatment of a travel and subsistence arrangement that was purported to be a salary sacrifice arrangement.</span><span style="color: #444444; font-family: Verdana, sans-serif; text-align: left;"> </span><span style="color: #444444; font-family: Verdana, sans-serif; text-align: left;"> </span><span style="color: #444444; font-family: Verdana, sans-serif; text-align: left;"><b>Reed may well appeal against the ruling.</b></span></span><br />
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<span style="background-color: white;">Reed made daily payments to cover lunch and commuting to around 500,000 temporary workers between 1998 and 2006, which they maintained was part of a salary sacrifice arrangement. </span></div>
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<span style="background-color: white;">The FTT found that the schemes operated did not constitute an effective salary sacrifice arrangement, as in reality no part of the salary was sacrificed. The tribunal judges said “The salary was paid in full, even if there was a later manipulation”. </span></div>
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<span style="background-color: white;">In addition, it was ruled that the employed temps were engaged under a series of job-by-job contracts rather than under a continuing contract of employment. Each assignment should therefore be treated as a separate engagement, and as a result the travel was therefore to a permanent workplace and the expenses were deemed to be ordinary commuting and non-deductible.</span></div>
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<span style="background-color: white;">This decision turned on:</span></div>
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<li><span style="background-color: white;">the contractual arrangements in place,</span></li>
<li><span style="background-color: white;">the clarity of the arrangement in place and</span></li>
<li><span style="background-color: white;">the fact that a salary sacrifice was found not to exist. </span></li>
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<span style="background-color: white;">The tax and NIC, along with interest, has been calculated at £158m. </span></div>
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<span style="background-color: white;"><br />The contractual arrangements were much discussed and show the need to carefully draft a contract of employment and to ensure the terms of the contract are fully understood by all. In the present case there was much made of the fact the employees could not understand their pay calculation</span><span style="background-color: #f3f4f8; color: #444444; font-size: 11px;">.</span></div>
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<span style="color: blue; font-size: large;"><b style="background-color: white;">Comment </b></span><strong style="background-color: white; color: #444444;">The starting point for any successful arrangements is a correctly worded, <i>understandable</i> contract of employment which in this kind of an arrangement, to be acceptable to HMRC, should be an overarching contract of employment guaranteeing at least 336 hours.</strong></div>
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<span style="background-color: white;"><span style="font-family: Verdana, sans-serif; text-align: left;">The position put to the tribunal that a salary sacrifice existed was ultimately rejected partly on the basis of the confusing contractual arrangements in place but comment was also made on the small savings enjoyed by the workers as the arrangement was designed to deliver the bulk of the savings to the employer.</span><span style="font-family: Verdana, sans-serif; text-align: left;"> </span></span><br />
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<span style="background-color: white;"><span style="font-family: Verdana, sans-serif; text-align: left;">The tribunal took the view that the employee could not understand what was happening to their pay from the payslip and that, in the tribunal view, a sacrifice by an employee should deliver a benefit to the employee.</span><span style="font-family: Verdana, sans-serif; text-align: left;"> </span><span style="font-family: Verdana, sans-serif; text-align: left;"> </span></span><br />
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<span style="background-color: white;"><span style="font-family: Verdana, sans-serif; text-align: left;">The tribunal went further to say that this purported sacrifice delivered no or little benefit to the worker and was an arithmetical exercise to deliver the maximum savings to Reed.</span></span>
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<span style="background-color: white;"><span style="font-family: Verdana, sans-serif; text-align: left;"><span style="color: blue; font-size: large;"><b>Comment</b></span> </span></span><strong style="background-color: white; color: #444444; font-family: Verdana, sans-serif; text-align: left;">In this case the tribunal reasoning that a salary sacrifice must deliver a benefit is potentially challengeable but the arrangement has to be transparent and to be understood and accepted by the employee if it is to be a valid sacrifice. To avoid the view that ‘little or no’ benefit is made by the employee, an equitable sharing of the savings would also be advisable.</strong><br />
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<span style="background-color: white;"><span style="color: #444444; font-family: Verdana, sans-serif; text-align: left;">In this case the tribunal found that HMRC were entitled to issue a dispensation where they had a belief that no tax was payable (even if they were wrong).</span><span style="color: #444444; font-family: Verdana, sans-serif; text-align: left;"> </span><span style="color: #444444; font-family: Verdana, sans-serif; text-align: left;"> </span><span style="color: #444444; font-family: Verdana, sans-serif; text-align: left;">However, as they found the expenses paid were a part of the employee’s wages, and there was no salary sacrifice in place, the expenses should have been subject to PAYE and NIC.</span><span style="color: #444444; font-family: Verdana, sans-serif; text-align: left;"> </span><span style="color: #444444; font-family: Verdana, sans-serif; text-align: left;"> </span><span style="color: #444444; font-family: Verdana, sans-serif; text-align: left;">In addition, they considered the effect if a valid salary sacrifice was found to be in place but took a view that the assignments were all fixed term employments and as such the expense allowance would be taxable; that is, the employee did not travel to temporary workplaces which would attract relief from tax.</span>
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<span style="background-color: white;"><span style="font-family: Verdana, sans-serif; text-align: left;"><span style="color: blue; font-size: large;">Comment </span></span></span><strong style="background-color: white; color: #444444; font-family: Verdana, sans-serif; text-align: left;">When entering into these arrangements it is important not only to consider the contractual arrangements to be put in place but also important to ensure that the arrangement is communicated in a transparent way which demonstrates the worker was in agreement or had all the information to understand the arrangements affecting him/her.</strong><br />
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<span style="background-color: white;"><span style="color: #444444; font-family: Verdana, sans-serif; text-align: left;">The tribunal did not decide on the “Reed’s legitimate expectation” point as that will be left for any further proceedings at the Upper Tribunal.</span><span style="color: #444444; font-family: Verdana, sans-serif; text-align: left;"> </span><span style="color: #444444; font-family: Verdana, sans-serif; text-align: left;"> </span><span style="color: #444444; font-family: Verdana, sans-serif; text-align: left;">However, the question they stated to be answered was “Can HMRC be required to apply a dispensation that Reed had a legitimate expectation was in place and covered the allowances paid, even where HMRC had no power to grant a dispensation”.</span><span style="color: #444444; font-family: Verdana, sans-serif; text-align: left;"> </span><span style="color: #444444; font-family: Verdana, sans-serif; text-align: left;"> </span><span style="color: #444444; font-family: Verdana, sans-serif; text-align: left;">The tribunal commented that as the disclosures made did not provide the full facts to HMRC this helps support HMRC’s contention that Reed had no “legitimate expectation” as it did not fully disclose all relevant matters.</span></span>
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<strong style="font-family: Verdana, sans-serif; text-align: left;"><span style="background-color: white; color: blue; font-size: large;">Comment </span></strong><span style="background-color: white;"><strong style="font-family: Verdana, sans-serif; text-align: left;">In </strong><strong style="font-family: Verdana, sans-serif; text-align: left;">this kind of arrangement all the facts should be on the table and </strong><strong style="font-family: Verdana, sans-serif; text-align: left;">HMRC and other parties should fully understand the arrangements in place </strong><strong style="font-family: Verdana, sans-serif; text-align: left;">with this being supported by clear employee communications. If this had been the case here it would have aided the case that a legitimate view was held that the dispensation made the payment of expenses exempt from PAYE and NIC even if that dispensation was later found to be wrong</strong></span><strong style="background-color: white; font-family: Verdana, sans-serif; text-align: left;">.</strong><br />
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<span style="background-color: white;"><span style="color: #38761d; font-size: large;"><strong style="font-family: Verdana, sans-serif; text-align: left;">What should you do next? </strong></span></span><span style="background-color: white;"><span style="font-family: Verdana, sans-serif; text-align: left;">This case will have possibly have far reaching implications for all employers entering into salary sacrifice arrangements (salary sacrifice arrangements can cover pensions, cars, bicycles, child care vouchers, flexible benefit schemes and many others).</span><span style="font-family: Verdana, sans-serif; text-align: left;"> </span><span style="font-family: Verdana, sans-serif; text-align: left;"> </span><span style="font-family: Verdana, sans-serif; text-align: left;">We suggest that all these arrangements are reviewed to ensure they are compliant and importantly that the workers fully understand the arrangement they have entered into.</span><span style="font-family: Verdana, sans-serif; text-align: left;"> </span><span style="font-family: Verdana, sans-serif; text-align: left;"> </span><span style="font-family: Verdana, sans-serif; text-align: left;">The Reed case highlights the pitfalls of getting it wrong. The employment contractual arrangements are also as important as the tax considerations.</span></span><br />
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<span style="background-color: white;"><span style="color: #444444; font-family: Verdana, sans-serif; text-align: left;">I have experience of successfully implementing these arrangements with the agreement of HMRC on a fully disclosed basis.</span><span style="color: #444444; font-family: Verdana, sans-serif; text-align: left;"> </span><span style="color: #444444; font-family: Verdana, sans-serif; text-align: left;">Therefore do not be put off by this case if you are considering implementing a salary sacrifice as they can be implemented successfully. These arrangements can realise considerable savings for both the employer and worker.</span></span><br />
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<span style="color: blue; font-family: Verdana, sans-serif; font-size: x-large;"><b><span style="background-color: white;">Case</span><span style="background-color: white;"> 2</span></b></span><b style="background-color: white; color: blue; font-family: Verdana, sans-serif; font-size: x-large;"> </b><span style="background-color: white; font-family: Verdana, sans-serif; line-height: 20px;">Astra Zeneca UK Limited (AZUL) v HMRC (the opinion of the Advocate General can be found <a href="http://curia.europa.eu/juris/document/document.jsf?docid=78845&pageIndex=0&doclang=en&mode=lst&dir=&occ=first&cid=424910" target="_blank">here </a> )</span><br />
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<span style="font-family: Verdana, sans-serif;">It seems to me the decision in this case was correct within the meaning of both EC and UK VAT legislation, but it could have a significant cost implication for those employers who have provided discounted retail vouchers to their employees without accounting for output tax over the years.</span></div>
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<span style="font-family: Verdana, sans-serif;">The decision was important because it confirmed the principle that where an employee gives up part of his cash remuneration in return for a supply of goods or services which in themselves are liable to VAT, this represents a supply by the employer to the employee for a consideration. It means that the employer can recover as input tax the VAT paid on the purchase of the goods or services concerned, but must account for output tax on the cash value of the salary “sacrifice”.</span></div>
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<strong><span style="font-family: Verdana, sans-serif; font-size: large;">VAT and employee benefits </span></strong><span style="background-color: white; font-family: Verdana, sans-serif;">VAT and employee benefits have always been a bone of contention between HMRC and businesses. Over the years, we’ve had potential issues arising from staff discounts and company cars. More recently, things have been more interesting as most large private sector employers have introduced different types of “flexible benefit” remuneration packages that enable employees to choose from a wide range of goods and, mostly, services.</span></div>
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<span style="font-family: Verdana, sans-serif;">The concept is simple – each employee has a remuneration “pot” which can be taken in form of a basic cash salary and minimum holiday entitlement, or varied to include a smaller cash salary and a range of other benefits, which are usually provided at a discounted “price”. These include various types of insurance, such as medical or dental insurance, childcare vouchers, goods such as bicycles, personal computers and various types of retail vouchers.</span></div>
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<span style="font-family: Verdana, sans-serif;">The AZUL judgement was very important in that it established, beyond any doubt, how VAT should be applied on transactions between employer and employee.</span></div>
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<strong><span style="font-family: Verdana, sans-serif; font-size: large;">The facts </span></strong><span style="background-color: white; font-family: Verdana, sans-serif;">AZUL provided such retail vouchers as part of their staff remuneration scheme. In the particular case, employees could opt to receive vouchers with a face value of £10, although the cost to the employer was between £9.25 and £9.55, representing a discount of between 4.5% and 7.5% to the employee.</span></div>
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<span style="font-family: Verdana, sans-serif;">Under normal VAT rules, businesses who buy and sell retail vouchers, can claim the VAT paid on their purchase but must account for output tax when the vouchers are “sold”. The sale of the vouchers is regarded as a supply of services as it entitles the purchaser, in this case the employee, the right to purchase goods for the face value of the voucher from the retailer concerned.</span></div>
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<span style="font-family: Verdana, sans-serif;">HMRC believed that AZUL could recover as input tax the VAT paid on the purchase of the voucher, but should have accounted for output tax on the supply to its employees. This would basically mean that the correct VAT accounting would be neutral for the company, ie the input tax and output tax would be equal.</span></div>
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<span style="font-family: Verdana, sans-serif;">What actually happened was that AZUL didn’t do either, but submitted a claim for input tax on the purchase of the vouchers, but didn’t account for output tax, arguing that giving the vouchers to staff weren’t liable to VAT as transactions between employers and employees don’t represent supplies for VAT purposes. Their position was that <strong>the provision of the vouchers to the employees meant that the vouchers were used for a business purpose so there was no liability to output tax.</strong>. In essence, that giving the vouchers to the staff in return for a salary sacrifice meant that the vouchers were “consumed” by the business and there was no supply to the employee.</span></div>
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<strong><span style="font-family: Verdana, sans-serif; font-size: large;">The relationship between employer and employee and whether there is a supply for VAT purposes </span></strong><span style="background-color: white; font-family: Verdana, sans-serif;">The key issue was that AZUL argued that the provision of employee benefits represented use by the business and therefore there was no liability to output tax. The ECJ judgement – which at just 6 pages is one of the shortest and most readable – dealt with the issue by answering the first in a list of questions which were referred by the Tribunal:</span></div>
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<em><span style="font-family: Verdana, sans-serif;">In the circumstances of this case, where an employee is entitled under the terms of his or her contract of employment to op to take part of his or her remuneration as a face value voucher, is Article 2 of the [Sixth Directive} ... to be interpreted such that the provision of that voucher by the employer to the employee constitutes a supply of services for consideration?</span></em></div>
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<span style="font-family: Verdana, sans-serif;">Article 2 deals with one of the most fundamental of VAT issues, ie it defines the term “supply” for VAT purposes, while Article 4 of the Directive defines the term “taxable person”.</span></div>
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<span style="font-family: Verdana, sans-serif;">Based on these fundamental principles, the ECJ had no hesitation in supporting HMRC’s view that the provision of the vouchers in return for a salary sacrifice represented a supply for a consideration which was liable to VAT. The vouchers were not used in the business, but represented a supply of services from AZUL to its employees for their personal use.</span></div>
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<strong><span style="font-family: Verdana, sans-serif; font-size: large;">What it means for supplies by an employer to an employee </span></strong><span style="background-color: white; font-family: Verdana, sans-serif;">AZUL confirms that when it comes to the provision of goods or services for personal use, the employer and employee are treated as separate legal entities.</span></div>
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<span style="font-family: Verdana, sans-serif;">It doesn't affect the employer/employee relationship in so far as the employee is contracted to provide services, ie whenever an employee enters into a contract of employment, the employee and the employer enter into a relationship whereby in return for a salary, the employee is paid by the employer for providing his time and presence working in the employer’s business. Paid employment is not a business activity, so the salary does not represent consideration for a supply by the employee to the employer.</span></div>
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<span style="font-family: Verdana, sans-serif;">However, the provision of goods and/or services by the employer to the employee <em>for non-business, i.e. personal, use</em> in return for a proportion of the salary does represent a supply for VAT purposes. Such transactions between the employer and employee are liable to VAT in the same way as transactions between any two separate entities.</span></div>
<div style="line-height: 20px; margin-bottom: 1.2em; margin-top: 0.6em; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Verdana, sans-serif;">The judgement of the ECJ simply confirms HMRC’s longheld viewpoint that wherever a business puts taxable goods or services to non-business use, any consideration that is charged for such use is liable to VAT. </span></div>
<div style="line-height: 20px; margin-bottom: 1.2em; margin-top: 0.6em; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Verdana, sans-serif;">The ruling doesn’t affect the position of those benefits which are either available to all employees for no “charge”, or the VAT treatment of benefits which are “purchased” but are exempt from VAT or zero-rated, such as health insurance or nursery vouchers. But employers are advised to review their employee remuneration packages to see if they have any liability on positive rated supplies made to employees that should be disclosed to HMRC.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="color: #222222; font-family: Verdana, sans-serif;"><br /></span></div>
</div>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com0Lightley Ct, Sandbach, Cheshire East CW11 4QA, UK53.1335482 -2.37332553.1311667 -2.3782605 53.1359297 -2.3683894999999997tag:blogger.com,1999:blog-5738696637442028054.post-5267274226650693882012-02-07T15:03:00.000+00:002012-03-05T14:58:16.971+00:00Cycle and save tax and the environment!<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="color: blue; font-family: Verdana, sans-serif; font-size: large;"><b>Cycling could be just the thing help you keep fit, save money and be kind to the environment.</b></span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="background-color: white; font-family: Verdana, sans-serif;"><span style="color: blue; font-size: large;"><b>HMRC like cyclists too, so what do you need to do to qualify for tax savings.</b></span></span></div>
<div style="background-color: white; font-size: 13px; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;">First you will need to get your employer to participate in the scheme, they can do this either by setting up their own scheme or by using <a href="http://www.cyclescheme.co.uk/">www.cyclescheme.co.uk</a> or <a href="http://www.bike2workscheme.co.uk/">http://www.bike2workscheme.co.uk/</a> .</span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;">The basic rules are:</span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;">You must use the bike and/or safety equipment mainly (more than 50 per cent of the time) for ‘qualifying’ journeys. This means a journey or part of a journey:</span></div>
<ul style="background-color: white; line-height: 22px; text-align: left;">
<li><span style="font-family: Verdana, sans-serif;">between your home and workplace</span></li>
<li><span style="font-family: Verdana, sans-serif;">between one workplace and another</span></li>
<li><span style="font-family: Verdana, sans-serif;">to and from the train station to get to work</span></li>
</ul>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;">Taking part in the scheme means that you don’t have to pay a lump sum up front to buy a bike and/or safety equipment. Instead, you could borrow the bike and/or equipment from your employer, usually up to the value of £1,000.</span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<strong><span style="font-family: Verdana, sans-serif;">Making loan repayments</span></strong></div>
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<strong><span style="font-family: Verdana, sans-serif;"><br /></span></strong></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;">Your employer may want to recover all or part of the cost of lending you the bike and/or safety equipment. If so, you would then make loan payments back to your employer over an agreed period (typically 12 to 18 months) to spread the cost.</span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;">The loan payments are usually taken out of your salary through a ‘salary sacrifice’ </span><span style="font-family: Verdana, sans-serif;">arrangement. This means you agree to accept a lower amount of salary in return for a benefit - the loan of a cycle and/or safety equipment. </span><span style="color: black; font-family: Verdana, sans-serif;"><a href="http://www.direct.gov.uk/en/TravelAndTransport/Cycling/DG_190101">http://www.direct.gov.uk/en/TravelAndTransport/Cycling/DG_190101</a></span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<strong><span style="font-family: Verdana, sans-serif;">Example of savings using Salary Sacrifice</span></strong></div>
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<strong><span style="font-family: Verdana, sans-serif;"> </span></strong></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;">Cost of bicycle: £500</span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;">Cost of accessories <u>£100</u></span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;">Total cost £600</span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;">Income Tax 20% £120</span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;">Employee National Insurance 12% <u> £72</u></span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;">Total Employee Saving £192</span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;">Your employer will save Employers National Insurance of 13.8% on the salary sacrificed.</span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;">The Employee can buy the cycle from the company for a price set using the HMRC valuation table below</span></div>
<table border="0" cellpadding="0" cellspacing="0" style="background-color: white; font-size: 13px; line-height: 22px; margin-bottom: 20px; margin-left: 0px; margin-right: 0px; margin-top: 0px; text-align: left; width: 580px;"><tbody>
<tr><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><strong><span style="font-family: Verdana, sans-serif;">Age of cycle</span></strong></td><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><strong><span style="font-family: Verdana, sans-serif;">Acceptable disposal value percentage</span></strong></td></tr>
<tr><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"></td><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><strong><span style="font-family: Verdana, sans-serif;">Original price of the cycle less than £500</span></strong></td><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><strong><span style="font-family: Verdana, sans-serif;">Original price £500+</span></strong></td></tr>
<tr><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><strong><span style="font-family: Verdana, sans-serif;">1 year</span></strong></td><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><span style="font-family: Verdana, sans-serif;">18%</span></td><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><span style="font-family: Verdana, sans-serif;">25%</span></td></tr>
<tr><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><strong><span style="font-family: Verdana, sans-serif;">18 months</span></strong></td><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><span style="font-family: Verdana, sans-serif;">16%</span></td><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><span style="font-family: Verdana, sans-serif;">21%</span></td></tr>
<tr><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><strong><span style="font-family: Verdana, sans-serif;">2 years</span></strong></td><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><span style="font-family: Verdana, sans-serif;">13%</span></td><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><span style="font-family: Verdana, sans-serif;">17%</span></td></tr>
<tr><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><strong><span style="font-family: Verdana, sans-serif;">3 years</span></strong></td><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><span style="font-family: Verdana, sans-serif;">8%</span></td><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><span style="font-family: Verdana, sans-serif;">12%</span></td></tr>
<tr><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><strong><span style="font-family: Verdana, sans-serif;">4 years</span></strong></td><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><span style="font-family: Verdana, sans-serif;">3%</span></td><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><span style="font-family: Verdana, sans-serif;">7%</span></td></tr>
<tr><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><strong><span style="font-family: Verdana, sans-serif;">5 years</span></strong></td><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><span style="font-family: Verdana, sans-serif;">Negligible</span></td><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><span style="font-family: Verdana, sans-serif;">2%</span></td></tr>
<tr><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><strong><span style="font-family: Verdana, sans-serif;">6 years &; over</span></strong></td><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><span style="font-family: Verdana, sans-serif;">Negligible</span></td><td style="padding-bottom: 6px; padding-left: 24px; padding-right: 24px; padding-top: 6px;"><span style="font-family: Verdana, sans-serif;">Negligible</span></td></tr>
</tbody></table>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;">In addition you can claim an HMRC mileage allowance for Cycling of 20p per mile and if your employer doesn’t pay the allowance you can claim back the tax on the allowance using form P87 <a href="http://www.hmrc.gov.uk/forms/p87.pdf">http://www.hmrc.gov.uk/forms/p87.pdf</a></span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;">If you have ‘Cycle to Work’ days your employer can provide free meals and refreshments for cyclists. <a href="http://www.hmrc.gov.uk/manuals/eimanual/eim21668.htm">http://www.hmrc.gov.uk/manuals/eimanual/eim21668.htm</a></span></div>
<div style="background-color: white; line-height: 22px; text-align: left;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div style="background-color: white; text-align: left;">
<div style="line-height: 22px;">
<span style="font-family: Verdana, sans-serif;">So as the saying goes ‘get on your bike’</span></div>
<div style="line-height: 22px;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<span style="font-family: Verdana, sans-serif;"></span><br />
<span style="font-family: Verdana, sans-serif;"><span style="line-height: 22px;">For UK residents it is one tax break that’s worth pursuing because the Cycle to Work scheme, can save you between 16 and 40 percent off the cost of a bike. </span></span><br />
<div style="line-height: 22px;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
</div>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com1Lightley Ct, Sandbach, Cheshire East CW11 4QA, UK53.1335482 -2.37332553.1311667 -2.3782605 53.1359297 -2.3683894999999997tag:blogger.com,1999:blog-5738696637442028054.post-13872456264324113472012-02-07T14:31:00.000+00:002012-02-07T14:31:14.271+00:00Time the dividends from your company carefully<span style="color: blue; font-family: Verdana, sans-serif; font-size: large;"><b>You have overdrawn your director's loan account (DLA). This can land both you and your company with an unexpected tax bill. Your golf club chump(s) suggest the company pays a dividend after the end of the company's financial year. Does this work? Is there a better option? </b></span><br />
<span style="color: blue; font-family: Verdana, sans-serif; font-size: large;"><b><br /></b></span><br />
<span style="font-family: Verdana, sans-serif;"><b style="color: blue; font-size: x-large;">Targeting loan accounts </b>One of the first things HMRC does when checking the accounts of an owner-managed company, is to examine the directors' loan accounts (DLA) closely.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">Your accountant should do the same thing when preparing the annual accounts. If he finds you owe the company money, he will usually suggest crediting your DLA with a bonus or dividend (more tax efficient) to balance the books. By the time HMRC see the figures everything appears to be in order. But is it?</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;"><b style="color: blue; font-size: x-large;">Two problems - only one fix </b>There are two tax charges which can bite from an overdrawn DLA:</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<br />
<ul>
<li><span style="font-family: Verdana, sans-serif;">Your company will have to pay tax amounting to 25% of the amount you owe it;</span></li>
<li><span style="font-family: Verdana, sans-serif;">You can be taxed on a benefit-in-kind (BiK).</span></li>
</ul>
<br />
<span style="font-family: Verdana, sans-serif;">You can avoid the tax on your company by simply paying a bonus or dividend to clear the amount you owe. Provided you do this within nine months of your company year end , HMRC will be happy and the company will not have to pay tax on your loan. </span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">However, you may still have a personal tax charge on the BiK and there is yet a further potential trap.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;"><span style="color: red; font-size: large;"><b>TRAP 1</b></span> A taxable BiK arises where, you owe your company more than £5,000 even if only for just one day. Paying a post-year-end bonus or dividend will <b>not</b> remove the BiK charge.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;"><b style="color: red; font-size: x-large;">TRAP 2 </b>If you were not aware of the BiK problem, you will almost certainly have failed to declare it on your P11d form (return of benefits and expenses). This can attract a substantial penalty.</span><br />
<span style="font-family: Verdana, sans-serif;"></span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;"><b>Incorrect P11D and P11D(b)returns:</b></span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">Penalties are based on a percentage of tax that is due and might be uncollected as a result of the errors in the form. The percentage varies according to the circumstances and seriousness of the error:</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<br />
<ul>
<li><span style="font-family: Verdana, sans-serif;">0% (for a genuine mistake made having taken reasonable care to complete the form correctly)</span></li>
<li><span style="font-family: Verdana, sans-serif;">30% (careless error)</span></li>
<li><span style="font-family: Verdana, sans-serif;">70% (deliberate error but not concealed from HMRC)</span></li>
<li><span style="font-family: Verdana, sans-serif;">100% (deliberate and concealed error).</span></li>
</ul>
<br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;"><b>Late submission</b></span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<br />
<ul>
<li><span style="font-family: Verdana, sans-serif;">Form P11D: £300 per return plus £60 per day until sent in</span></li>
<li><span style="font-family: Verdana, sans-serif;">Form P11D(b): £100 per 50 employees per month. </span></li>
</ul>
<br />
<div>
<span style="font-family: Verdana, sans-serif;"><b style="color: blue; font-size: x-large;">Toolkit help </b>HMRC warn of both these traps in their Director's Loan Account Toolkit which can be found <a href="http://www.hmrc.gov.uk/agents/toolkits/dla.pdf" target="_blank">here</a> . This hows they are aware of the problem and gives you less excuse for ignoring it. So what is the fix?</span></div>
<div>
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div>
<span style="font-family: Verdana, sans-serif;"><b style="color: blue; font-size: x-large;">Forestalling </b>Obviously keep close track of your loan account balance and if it's likely to go over £5,000 clear ut immediately with a bonus or dividend. Preferably, don't leave it until your year end.</span></div>
<div>
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div>
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div>
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div>
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div>
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div>
<div lang="en-US" style="line-height: 100%; margin-bottom: 0cm; page-break-after: avoid;">
<span style="font-family: Verdana, sans-serif;">
<span style="color: black;"><span style="font-family: 'Arial Narrow', sans-serif;"><span style="font-size: small;"><b>Declaring
and paying dividends</b></span></span></span></span></div>
<span style="font-family: Verdana, sans-serif;">
</span><br />
<div lang="en-US" style="margin-bottom: 0cm;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<span style="font-family: Verdana, sans-serif;">
<div align="JUSTIFY" lang="en-US" style="margin-bottom: 0cm;">
<span style="color: black;"><span style="font-family: 'Arial Narrow', sans-serif;">A
dividend can be declared at any time by a company but will only be
valid where it is made in accordance with company law - see s.829 to
s.853 Companies Act 2006. Essentially these rules say that a dividend
should be paid only from the company’s profit accumulated at the
time the dividend is declared.</span></span></div>
<div align="JUSTIFY" lang="en-US" style="margin-bottom: 0cm;">
<br /></div>
<div align="JUSTIFY" lang="en-US" style="margin-bottom: 0cm;">
<span style="color: black;"><span style="font-family: 'Arial Narrow', sans-serif;">Where
you intend to declare a dividend on the first day, or soon after the
start, of an accounting period you won’t know for sure the results
of the financial year just ended, but you will probably have a good
idea. Producing regular management accounts, say quarterly, will help
you keep tabs. Even without these you may know that the company has
substantial profits built up over the years in which case declaring a
dividend at the start of a year won’t be a problem. If, however,
the level of profit is predictable you should estimate it before
working out how much dividend can be paid. </span></span>
</div>
<div align="JUSTIFY" lang="en-US" style="margin-bottom: 0cm;">
<br /></div>
<div align="JUSTIFY" lang="en-US" style="margin-bottom: 0cm;">
<span style="color: black;"><span style="font-family: 'Arial Narrow', sans-serif;">It’s
advisable to be cautious and not declare a dividend that exceeds
profits. Where this happens and the recipient is a material
shareholder, this usually means they own 5% or more of the ordinary
share capital, they will be required to repay the dividend. And if
the proper paperwork isn’t kept (see below) HMRC might argue that
the excess is taxed and subject to NI as additional salary. </span></span>
</div>
<div align="JUSTIFY" lang="en-US" style="margin-bottom: 0cm;">
<br /></div>
<h2 class="western" lang="en-US">
Paying a dividend</h2>
<div align="JUSTIFY" lang="en-US" style="margin-bottom: 0cm;">
<br /></div>
<div align="JUSTIFY" lang="en-US" style="margin-bottom: 0cm;">
<span style="color: black;"><span style="font-family: 'Arial Narrow', sans-serif;">Declaring
a dividend is the formal step needed before actually paying it. A
declaration is just a statement that says how much and when the
dividend will be paid. There’s no reason declaration and payment
can’t happen on the same day. </span></span>
</div>
<div align="JUSTIFY" lang="en-US" style="margin-bottom: 0cm;">
<br /></div>
<div align="JUSTIFY" lang="en-US" style="margin-bottom: 0cm;">
<span style="color: black;"><span style="font-family: 'Arial Narrow', sans-serif;">The
director/shareholders loan account can only be credited with a
dividend on the date it’s payable - and not the date of the
declaration.</span></span></div>
<div align="JUSTIFY" lang="en-US" style="margin-bottom: 0cm;">
<br /></div>
<h2 class="western" lang="en-US">
Paperwork</h2>
<div align="JUSTIFY" lang="en-US" style="margin-bottom: 0cm;">
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<span style="color: black;"><span style="font-family: 'Arial Narrow', sans-serif;">Where
the timing of a dividend is critical this makes the need to keep
accurate documentation and records equally so. Companies should
record the date the dividend is declared. This might be in the form
of a minute of a board meeting, or for a single director company just
a note kept with the company’s statutory records (company register
etc.).</span></span></div>
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<h2 class="western" lang="en-US">
Other shareholders</h2>
<div align="JUSTIFY" lang="en-US" style="margin-bottom: 0cm;">
<br /></div>
<div align="JUSTIFY" lang="en-US" style="margin-bottom: 0cm;">
<span style="color: black;"><span style="font-family: 'Arial Narrow', sans-serif;">A
dividend declared will be payable to every holder of the same type of
share. This can cause trouble if one shareholder wants a dividend
paid early in the financial year while another wants to wait. To get
round this problem you can issue additional classes of share for each
director/shareholder in addition to their ordinary shares. This will
allow you to declare dividends at different dates. It’s advisable
to take professional advice before going down this route.</span></span></div>
</span></div>
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<span style="color: blue; font-family: Verdana, sans-serif; font-size: large;"><b><br /></b></span><br />
<span style="color: blue; font-size: large;"><b><br /></b></span>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com0Lightley Ct, Sandbach, Cheshire East CW11 4QA, UK53.1335482 -2.37332553.1311667 -2.3782605 53.1359297 -2.3683894999999997tag:blogger.com,1999:blog-5738696637442028054.post-25444372758691265172012-02-05T14:26:00.001+00:002012-02-05T23:20:11.157+00:00New tax investigation initiatives<span style="color: blue; font-family: Verdana, sans-serif; font-size: large;"><b>HMRC are now taking a much harder stance in cases of fraud. Is that you?</b></span><br />
<span style="color: blue; font-family: Verdana, sans-serif; font-size: large;"><b><br /></b></span><br />
<span style="font-family: Verdana, sans-serif;"><b style="color: blue; font-size: x-large;">New strategy </b>Last summer HMRC carried out a consultation on the way investigations are settled. They have now published a revised Code of Practice (COP9) which can be read <a href="http://www.hmrc.gov.uk/admittingfraud/owningup.htm" target="_blank">here</a> . Pleasant bed-time reading it is not! </span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;"><b style="color: blue; font-size: x-large;">What is tax fraud? </b>Usually - you think of fraud in terms of large sums of money but it can - and does - mean gaining any advantage, usually financial, by deception . HMRC will now categorise those who underpay tax into those who make mistakes and those who commit fraud with no middle ground.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;"><b style="color: blue; font-size: x-large;">Confession time </b>If HMRC suspect deliberate, unfair tax avoidance, a COP9 will be issued. This includes a "contractual disclosure facility" (CDF) form where you confess all instances where you have unfairly dodged tax. If they are satisfied with your response, they will not prosecute you. If you don't make a full confession, they will be much harsher.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">It will be some time before we know how HMRC will apply this new strategy . Will COP9 be automatically issued in every tax enquiry? </span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;"><b style="color: red; font-size: x-large;">TRAP </b>If you receive a COP9, don't ignore it. If you don't rely within 60 days, HMRC will treat this as non-co-operation. <i><b>Contact me or your tax adviser immediately.</b></i></span><br />
<span style="font-family: Verdana, sans-serif;"><i><b><br /></b></i></span><br />
<span style="font-family: Verdana, sans-serif;"><b style="color: #38761d; font-size: x-large;">TIP </b>Don't let HMRC bully you into signing a COP9. If you do, you will be admitting deliberate, unfair tax avoidance and HMRC will automatically charge higher enalties if you have underpaid tax. </span><br />
<span style="color: blue; font-family: Verdana, sans-serif; font-size: large;"><b><br /></b></span><br />
<span style="color: blue; font-family: Verdana, sans-serif; font-size: large;"><b><br /></b></span>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com0Lightley Ct, Sandbach, Cheshire East CW11 4QA, UK53.1335482 -2.37332553.1311667 -2.3782605 53.1359297 -2.3683894999999997tag:blogger.com,1999:blog-5738696637442028054.post-31870542370445977542012-02-03T10:58:00.000+00:002012-02-09T18:16:07.000+00:00Tax Relief for pre-trading expenses<span style="font-family: Verdana, sans-serif;"><br /></span><br />
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<div class="pd-rating sd-content" id="pd_rating_holder_5101571_post_168" style="display: inline-block; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
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<span style="font-family: Verdana, sans-serif;">By the time you actually start trading, you may have spent thousands of pounds on research and setting up the business.</span></div>
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<span style="font-family: Verdana, sans-serif;">Provided you have formally notified HM Revenue and Customs that you have started up a business, <b>most</b> of these costs are usually allowable as business expenses in the first year (some may not be - see below for the most common of these exceptions).</span></div>
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<span style="color: blue; font-family: Verdana, sans-serif; font-size: large;"><b>Income Tax (Trading and Other Income) Act 2005</b></span></div>
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<b><span style="font-family: Verdana, sans-serif;">Pre-trading expenses</span></b><br />
<b><span style="font-family: Verdana, sans-serif;"><br /></span></b><br />
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<div style="color: black; line-height: normal;">
<span style="color: #222222;"><span style="font-family: Verdana, sans-serif; line-height: 22px;">Relief under ICTA88/S401 for pre-trading expenditure is only available to the person who incurred the expenditure and commences the trade. </span></span></div>
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<div id="subsect10.1" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; color: #000011; line-height: normal; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 14px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: left; vertical-align: baseline;">
<span style="font-family: Verdana, sans-serif;">From the moment you decide to go into business, start keeping a <strong style="background-attachment: initial; background-clip: initial; background-color: transparent; background-image: initial; background-origin: initial; border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-weight: bold; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">record</strong> (with matching receipts, invoices and bank statements) of all your business expenditure. Best of all s</span><span style="background-color: transparent; font-family: Verdana, sans-serif; line-height: 14px;">et up a separate bank account to make this easier. </span></div>
<div style="line-height: 18px; text-align: justify;">
<span style="font-family: Verdana, sans-serif;">Expenses and costs incurred by small businesses and companies before they begin business can be offset against their sales in the first accounting year if they can prove the pre-trading expense was incurred within seven years from their first day of trading and would have been deductible as a business expense if it had been incurred after the business started trading.</span></div>
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<span style="font-family: Verdana, sans-serif;"><br /></span></div>
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<span style="font-family: Verdana, sans-serif;">Such pre-trading expenditure may commonly include:</span></div>
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<br />
<ul>
<li><span style="background-color: white; font-family: Verdana, sans-serif;">advertising costs, </span></li>
<li><span style="background-color: white; font-family: Verdana, sans-serif;">wages, </span></li>
<li><span style="background-color: white; font-family: Verdana, sans-serif;">rent, </span></li>
<li><span style="background-color: white; font-family: Verdana, sans-serif;">rates, </span></li>
<li><span style="background-color: white; font-family: Verdana, sans-serif;">insurance, </span></li>
<li><span style="background-color: white; font-family: Verdana, sans-serif;">bank charges and interest, </span></li>
<li><span style="background-color: white; font-family: Verdana, sans-serif;">lease rentals on plant and machinery, computers equipment, office furniture and accountancy fees.</span></li>
</ul>
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<div style="line-height: 18px; text-align: justify;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div style="line-height: 18px; text-align: justify;">
<span style="font-family: Verdana, sans-serif;">Where business assets are bought before commencement of trade, they are introduced into the business at their current market value and treated as if purchased on the first day of business. The business is also entitled to claim capital allowance on the tangible asset.</span><br />
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<ul style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; color: #000011; line-height: normal; list-style-image: initial; list-style-position: initial; list-style-type: none; margin-bottom: 0px; margin-left: 20px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 14px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: left; vertical-align: baseline;">
<li><span style="background-color: white; font-family: Verdana, sans-serif;">Some costs are <strong style="background-attachment: initial; background-clip: initial; background-color: transparent; background-image: initial; background-origin: initial; border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-weight: bold; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">not allowable</strong>.</span></li>
<li><span style="background-color: white; font-family: Verdana, sans-serif;"><br /></span></li>
<li><span style="background-color: transparent; font-family: Verdana, sans-serif; line-height: 14px;">For example, training courses are only an allowable expense once you have officially commenced trading.</span></li>
<li><span style="background-color: transparent; font-family: Verdana, sans-serif; line-height: 14px;"><br /></span></li>
<li><span style="background-color: white; font-family: Verdana, sans-serif;">If you form a </span><strong style="background-attachment: initial; background-clip: initial; background-color: transparent; background-image: initial; background-origin: initial; border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Verdana, sans-serif; font-weight: bold; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">limited company</strong><span style="background-color: white; font-family: Verdana, sans-serif;">, the formation costs incurred are not allowable.</span></li>
</ul>
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<ul style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; list-style-image: initial; list-style-position: initial; list-style-type: none; margin-bottom: 0px; margin-left: 20px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 14px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: left; vertical-align: baseline;"></ul>
<b style="background-color: white; font-family: Verdana, sans-serif; line-height: 1.5; text-align: left;"><span style="color: blue;">VAT Paid Before VAT Registration</span></b><br />
<ul style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; list-style-image: initial; list-style-position: initial; list-style-type: none; margin-bottom: 0px; margin-left: 20px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 14px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: left; vertical-align: baseline;"><span style="color: #222222; font-family: Verdana, sans-serif; line-height: 20px;"><b>
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<span style="font-family: Verdana, sans-serif;">You can reclaim any VAT you are charged on goods or services that you use to set up your business.</span></div>
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<span style="font-family: Verdana, sans-serif;">Normally, this will include:</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">• VAT on goods you bought for your business within the last 4 years and which you have not yet sold.</span><br />
<span style="font-family: Verdana, sans-serif;">• VAT on services, which you received not more than 6 months before your date of registration.</span></div>
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<span style="font-family: Verdana, sans-serif;">You should include this VAT on your first VAT return. </span></div>
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<table align="center" border="0" cellpadding="0" cellspacing="0" style="color: black;"><tbody>
<tr><td align="left" valign="middle"><br /></td></tr>
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<tr><td align="left" class="text" style="line-height: 18px; text-decoration: none;" valign="top"><div align="justify" class="text" style="text-decoration: none;">
<table align="center" border="0" cellpadding="0" cellspacing="0" style="color: black;"><tbody>
<tr><td align="left" valign="middle"><br /></td></tr>
<tr><td align="left" valign="top"><table border="0" cellpadding="2" cellspacing="1"><tbody>
<tr><td align="left" class="text" style="text-decoration: none;" valign="top"><div align="justify" class="text" style="text-decoration: none;">
<div style="line-height: 18px;">
<span style="background-color: white; font-family: Verdana, sans-serif;"><br style="line-height: 20px; text-align: -webkit-auto;" /></span></div>
<div style="line-height: 18px;">
<span style="background-attachment: initial; background-clip: initial; background-color: white; background-image: initial; background-origin: initial; border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Verdana, sans-serif; line-height: 20px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: -webkit-auto; vertical-align: baseline;">To able to make this claim, the following conditions have to be met:-</span></div>
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<span style="background-color: white; font-family: Verdana, sans-serif;"><br style="line-height: 20px; text-align: -webkit-auto;" /></span></div>
<div style="line-height: 18px;">
<span style="background-attachment: initial; background-clip: initial; background-color: white; background-image: initial; background-origin: initial; border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Verdana, sans-serif; line-height: 20px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: -webkit-auto; vertical-align: baseline;">•the goods were bought by you as the entity (for example, the individual, business or organisation) that is now registered for VAT</span></div>
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<span style="background-color: white; font-family: Verdana, sans-serif;"><br style="line-height: 20px; text-align: -webkit-auto;" /></span></div>
<div style="line-height: 18px;">
<span style="background-attachment: initial; background-clip: initial; background-color: white; background-image: initial; background-origin: initial; border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Verdana, sans-serif; line-height: 20px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: -webkit-auto; vertical-align: baseline;">•the goods are for your VAT taxable business purposes, which means they must relate to VAT taxable goods or services that you supply</span></div>
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<span style="background-color: white; font-family: Verdana, sans-serif;"><br style="line-height: 20px; text-align: -webkit-auto;" /></span></div>
<div style="line-height: 18px;">
<span style="background-attachment: initial; background-clip: initial; background-color: white; background-image: initial; background-origin: initial; border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Verdana, sans-serif; line-height: 20px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: -webkit-auto; vertical-align: baseline;">•the goods are still held by you or they have been used to make other goods you still hold</span></div>
<div style="line-height: 18px;">
<span style="background-color: white; font-family: Verdana, sans-serif;"><br style="line-height: 20px; text-align: -webkit-auto;" /></span></div>
<div style="line-height: 18px;">
<span style="background-color: white; font-family: Verdana, sans-serif;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; line-height: 20px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: -webkit-auto; vertical-align: baseline;">For example, prior to registering for VAT the business purchased 10,000 widgets and sold 3,000 of these products. The business can, therefore, claim back VAT on the remaining 7,000 items in stock at time of registering for VAT.</span><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; line-height: 20px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: -webkit-auto; vertical-align: baseline;"> </span></span></div>
<div style="line-height: 18px;">
<span style="background-color: white; font-family: Verdana, sans-serif;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; line-height: 20px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: -webkit-auto; vertical-align: baseline;"><br /></span></span></div>
<div style="line-height: 18px;">
<span style="background-color: white; font-family: Verdana, sans-serif;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; color: blue; font-size: large; line-height: 20px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: -webkit-auto; vertical-align: baseline;"><b>Deregistration and Reregistration </b></span></span><span style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: normal;">On deregistration a trader must account for output tax in respect of assets on hand if the liability exceeds £1,000. If the trader later </span><b style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: normal;">reregisters</b><span style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: normal;"> for VAT and the assets in question (or some of them) are again to be used in the business, the output tax previously charged on deregistration (or the respective part of it) is potentially deductible input tax of the newly reregistered business.</span></div>
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<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: normal;">However, the trader will not have a valid </span><b style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: normal;">tax invoice</b><span style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: normal;">, having merely accounted for output tax on deregistration. HMRC used to allow deduction of this input tax only by </span><b style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: normal;">concession</b><span style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: normal;"> but now accepts that if the trader can demonstrate having accounted for output tax in respect of the assets in question on previous deregistration, that is adequate alternative evidence of having incurred the input tax. A tax invoice is not, therefore, strictly necessary and the concession is, accordingly, not necessary either and has been </span><b style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: normal;">withdrawn</b><span style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: normal;">. The effective position thus remains unchanged but HMRC's rationale for allowing the claim has been updated.</span></div>
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</div>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com1Lightley Ct, Sandbach, Cheshire East CW11 4QA, UK53.1335482 -2.37332553.1311667 -2.3782605 53.1359297 -2.3683894999999997tag:blogger.com,1999:blog-5738696637442028054.post-3880242929972427672012-01-26T10:08:00.000+00:002012-01-30T11:26:24.262+00:005 April 2012 Tax Planning<br />
<h1 style="color: #00235d; font-weight: normal; line-height: 27px; margin-bottom: 15px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: left;">
<span style="font-size: large;"><strong style="line-height: 18px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Verdana, sans-serif;">With the end of the UK tax year </span></strong><strong style="line-height: 18px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Verdana, sans-serif;">approaching, review your business and personal finances to ensure that they are as tax-efficient as possible. Let us consider some of the planning options available before 6 April 2012, whilst also looking ahead to some of the business and tax changes planned for 2012/13.</span></strong></span></h1>
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<span style="color: blue; font-family: Verdana, sans-serif; font-size: large;">Don't waste personal allowances </span><span style="font-family: Verdana, sans-serif; font-weight: normal;">The 'tax-free' personal allowance (PA) for 2011/12 is £7,475. Take steps now to ensure you fully use it.</span></h2>
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<span style="font-family: Verdana, sans-serif;">If your spouse or partner has little or no income, transfer income to them to ensure that personal allowances are being utilised. Similarly, it is costly for one spouse or civil partner to be paying tax at 40% or even 50% while the other pays tax at only 20%. Equalising income where possible ensures that you both pay tax at the lowest possible rate, thereby reducing the overall combined tax bill.</span></div>
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<span style="font-family: Verdana, sans-serif;">The PA is gradually withdrawn where adjusted net income exceeds £100,000 (being reduced by £1 for every £2 of income over £100,000) and is lost completely once income reaches £114,950. This is a 60% effective tax rate for income between these amounts. Consider reducing income to below £100,000, for example: </span><br />
<br />
<ul>
<li><span style="font-family: Verdana, sans-serif;">by making pension contributions,</span></li>
<li><span style="font-family: Verdana, sans-serif;">donating to charity or</span></li>
<li><span style="font-family: Verdana, sans-serif;">transferring income producing assets to a spouse or civil partner.</span></li>
</ul>
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<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">Other strategies can include delaying bonus or dividend payments - please talk to us about the implications of this.</span></div>
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<span style="color: blue; font-family: Verdana, sans-serif; font-size: large;">Looking Ahead: Personal Allowances </span><span style="font-family: Verdana, sans-serif; font-weight: normal;"><span style="font-size: small;">The PA for those aged under 65 increases to £8,105 from 6 April 2012. However, the advantage to higher rate taxpayers will be countered by a lowering of the higher rate threshold, to £34,370.</span></span></h3>
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<span style="font-family: Verdana, sans-serif;">In addition, the PA for those aged 65 to 74 will rise from £9,940 to £10,500 for 2012/13, while the PA for individuals aged 75 and over will increase from £10,090 to £10,660.</span></div>
<h2 style="line-height: 18px; margin-bottom: 15px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: left;">
<span style="color: blue; font-family: Verdana, sans-serif; font-size: large;">Review your capital expenditure </span><span style="font-family: Verdana, sans-serif; font-weight: normal;"><span style="font-size: small;">The majority of businesses are able to claim a 100% Annual Investment Allowance (AIA) on the first £100,000 of expenditure on most types of plant and machinery (except cars)</span></span><span style="font-family: Verdana, sans-serif; font-size: small; font-weight: normal;"> but see 'Looking Ahead', below.</span></h2>
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<span style="font-family: Verdana, sans-serif;">In addition to the AIA, there are specific 100% allowances available for some investments, including energy-saving equipment and low-emissions cars.</span></div>
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<span style="font-family: Verdana, sans-serif;">If you buy just before the end of the current accounting year the allowances will usually be available a year earlier than if the purchase was made just after the year end. In the same way, the disposal of an asset may trigger an earlier claim for relief or even an additional charge to tax.</span></div>
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<span style="color: blue; font-family: Verdana, sans-serif; font-size: large;">Looking Ahead: Capital Allowances </span><span style="font-family: Verdana, sans-serif; font-weight: normal;"><span style="font-size: small;">From April 2012 the amount of expenditure on plant and machinery qualifying for a 100% year one write-off (via the AIA), reduces from £100,000 to just £25,000.</span></span></h3>
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<span style="font-family: Verdana, sans-serif;">In addition, for chargeable periods ending on or after 1 April 2012 (for businesses within the charge to corporation tax) and on or after 6 April 2012 (for businesses within the charge to income tax), the rates of writing down allowances will be reduced from 20% to 18% (main rate pool) and from 10% to 8% (special rate pool).</span></div>
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<span style="font-family: Verdana, sans-serif;"><b>Note:</b> for businesses with years straddling 31 March/5 April, there will be a transitional AIA and writing down allowance.</span></div>
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<span style="font-family: Verdana, sans-serif;"><b><em style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Enterprise Zones</em>:</b> As announced in the Autumn Statement, the Enterprise Zones in assisted areas will qualify for enhanced capital allowances. These allowances will be available from 1 April 2012 to 31 March 2018.</span></div>
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<span style="color: blue; font-family: Verdana, sans-serif; font-size: large;">Consider tax-efficient savings and investments</span></h3>
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<span style="font-family: Verdana, sans-serif;"><em style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">ISAs:</strong></em> You have until 5 April 2012 to make your 2011/12 ISA investment. For all adult savers the maximum investment in 2011/12 is £10,680, of which up to £5,340 can be invested in cash. 16-18 year olds can invest up to £5,340 only in a cash ISA.</span></div>
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<span style="font-family: Verdana, sans-serif;">The new Junior ISA, for those aged under 18 who do not have a Child Trust Fund account, allows investment of up to £3,600 in 2011/12.</span></div>
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<span style="font-family: Verdana, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><em style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">The Enterprise Investment Scheme (EIS):</em></strong> The EIS allows income tax relief at 30% on new equity investment (in qualifying unquoted trading companies) of up to £500,000 per tax year. Capital gains tax (CGT) exemption is also given on qualifying shares held for at least three years.</span></div>
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<span style="font-family: Verdana, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><em style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Venture Capital Trusts (VCTs):</em></strong> Individuals investing up to £200,000 a year in VCTs will be exempt from tax on resulting dividends and on capital gains when they dispose of shares. Individuals who subscribe for new ordinary shares in VCTs will, in addition, be entitled to income tax relief at 30% on up to £200,000 in any tax year, provided the shares are held for at least five years.</span></div>
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<span style="color: blue; font-family: Verdana, sans-serif; font-size: large;">Looking Ahead: Savings and investments</span></h3>
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<span style="font-family: Verdana, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><em style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">ISAs:</em></strong> The maximum investment limit for an adult ISA will rise to £11,280 from 6 April 2012. Up to £5,640 can be invested in a cash ISA. The Junior ISA subscription limit will remain at £3,600.</span></div>
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<span style="font-family: Verdana, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><em style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">EIS and VCTs:</em></strong> As announced in the Autumn Statement, the EIS will be simplified by relaxing the connected person rules and the definition of shares that qualify for relief, and a new qualifying test will be introduced. The Government will also remove the £1m investment limit per company for VCTs to help reduce the administrative burdens associated with the scheme.</span></div>
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<span style="font-family: Verdana, sans-serif;">From 6 April 2012 the employee limit for both EIS and VCT purposes will be increased to fewer than 250 employees, while the gross asset limit will rise to £15m before the investment and £16m after. In addition, the maximum annual amount that can be invested in a company will increase to £10m and the maximum annual amount that an individual can invest under the EIS will rise to £1m.</span></div>
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<span style="font-family: Verdana, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><em style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">SEIS:</em></strong> From April 2012, a new Seed Enterprise Investment Scheme will aim to encourage investment in start-up companies. The SEIS provides income tax relief of up to 50% for individuals who invest in shares in qualifying companies, with an annual investment limit for individuals of £100,000 and a cumulative investment limit for companies of £150,000. The scheme also offers a capital gains tax 'holiday' for investments made.</span></div>
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<span style="color: blue; font-family: Verdana, sans-serif; font-size: large;">Make pension contributions </span><span style="font-family: Verdana, sans-serif; font-weight: normal; line-height: 18px;"><span style="font-size: small;">Investing in a pension scheme, whether a company or a personal scheme, allows you to enjoy tax breaks on your pension savings. There are tax releifs as you invest and a tax-free regime for your savings. Your employer may also be able to contribute and obtain tax relief.</span></span></h2>
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<span style="font-family: Verdana, sans-serif;">For pension contributions to be applied against 2011/12 income they must be paid by 5 April 2012. Tax relief is available on annual contributions limited to the greater of £3,600 (gross) or the amount of the UK relevant earnings, but subject also to the annual allowance. Pension contributions can be made at up to 100% of relevant earnings, subject to the annual allowance of £50,000. Unused allowances (up to £50,000 per year) may be carried forward for up to three years. Unused allowances from 2008/09 will be lost unless used by 5 April 2012.</span></div>
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<span style="color: blue; font-family: Verdana, sans-serif; font-size: large;">Looking Ahead: Pensions </span><span style="font-family: Verdana, sans-serif; font-weight: normal; line-height: 18px;"><span style="font-size: small;">The lifetime allowance on money that can be accrued in a pension fund and still receive tax relief, will fall from £1.8m to £1.5m from April 2012.</span></span></h3>
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<span style="font-family: Verdana, sans-serif;">Meanwhile, from October 2012, employers will have to enrol all eligible workers into a qualifying pension scheme. Auto-enrolment is being phased in from October 2012, on a staged basis. In the 2011 Autumn Statement, the starting deadline for employers with fewer than 50 workers was deferred until the start of the next Parliament.</span></div>
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<strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="color: blue; font-family: Verdana, sans-serif; font-size: large;">Utilise inheritance tax (IHT) exemptions </span></strong><span style="font-family: Verdana, sans-serif; font-weight: normal; line-height: 18px;"><span style="font-size: small;">IHT is currently payable at 40% on total assets exceeding £325,000 at death. Early planning is therefore essential in order to minimise your liability to IHT.</span></span></h2>
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<span style="font-family: Verdana, sans-serif;">Where possible, make sure you utilise the annual IHT exemption for gifts before the 5 April year end. This is £3,000 for 2011/12. Any unused allowance for 2010/11 may be brought forward for use after the 2011/12 allowance has been exhausted. Gifts covered by the exemption do not form part of the estate for IHT purposes.</span></div>
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<span style="font-family: Verdana, sans-serif;">Your IHT planning strategies may also include maximising reliefs, utilising exempt transfers and making the most of trusts.</span></div>
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<span style="color: blue; font-family: Verdana, sans-serif; font-size: large;">Looking Ahead: Inheritance Tax </span><span style="font-family: Verdana, sans-serif; font-weight: normal; line-height: 18px;">The IHT threshold has been frozen at £325,000 until 2015. Transfers to a spouse or civil partner remain exempt.</span></h3>
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<span style="font-family: Verdana, sans-serif;">However, a reduced inheritance tax rate of 36% will apply from 6 April 2012 to death estates, where 10% or more of the net estate is left to charity.<strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><br clear="all" style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /></strong></span></div>
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<span style="color: blue; font-family: Verdana, sans-serif; font-size: large;">Consider a company van </span><span style="font-family: Verdana, sans-serif; font-weight: normal; line-height: 18px;"><span style="font-size: small;">Tax and national insurance costs could mean your company car may not be the most tax-efficient option for either employer or employee. For some, an employer provided van may be a viable alternative to a company car: the tax charge is £1,200 plus up to £220 for fuel for those paying tax at 40% (earning approximately £42,500 to £150,000 in 2011/12).</span></span></h2>
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<span style="font-family: Verdana, sans-serif;">The company car or van benefit is currently subject to a Class 1A national insurance charge of 13.8%, payable by the employer.</span></div>
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<span style="font-family: Verdana, sans-serif;">It may also be worth reviewing the company car policy completely, as it could prove more beneficial to pay employees for business mileage in their own vehicles, at the statutory mileage rates. </span></div>
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<span style="color: blue; font-family: Verdana, sans-serif; font-size: large;">Looking Ahead: Travel </span><span style="font-family: Verdana, sans-serif; font-weight: normal; line-height: 18px;"><span style="font-size: small;">From 6 April 2012 the table of tax bands will be extended down to include a new 10% band for cars emitting up to 99g/km. This will replace the existing 10% band, so that qualifying low emissions cars (QUALECs) will no longer exist as a separate category. The rate for emissions of 100g/km will be 11% and will increase by 1% for every 5g/km to a maximum of 35%, as at present.</span></span></h3>
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<span style="font-family: Verdana, sans-serif;">This is consistent with the reduction in CO<sub style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">2</sub> figures attained by manufacturers since the bases of company car taxation changed.</span></div>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com1Sandbach, Cheshire East CW11 4QA, UK53.1335482 -2.37332553.1311797 -2.3782175 53.1359167 -2.3684325tag:blogger.com,1999:blog-5738696637442028054.post-64644864214567496832012-01-17T03:06:00.002+00:002012-01-17T03:06:53.688+00:00Renewals deduction to go<b><span style="font-family: Verdana, sans-serif; font-size: large;">Businesses can presently opt to claim a tax deduction against profit instead of claiming capital allowances when plant and machinery are replaced. HMRC has said this practice will end. Will your business be worse off?</span></b><br />
<b><span style="font-family: Verdana, sans-serif; font-size: large;"><br /></span></b><br />
<span style="color: blue; font-family: Verdana, sans-serif; font-size: large; font-weight: bold;">Extra statutory concessions review </span><span style="font-family: Verdana, sans-serif;">The courts have forced HMRC to look again at their informal tax concessions ("extra statutory concessions"). HMRC have announced that the renewals allowance for plant and machinery will end on 31 March 2013 for companies and 5 April 2013 for individuals.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">(Details of the existing concession can be found <a href="http://www.hmrc.gov.uk/manuals/bimmanual/BIM46935.htm" target="_blank">here</a> .)</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;"><b style="color: blue; font-size: x-large;">What's been scrapped? </b>Tax deductions for the cost of replacing or altering <u>tools</u> used in a trade are not affected. These are allowed by law. It is the extension of this rule to plant and machinery that's going. Tools, plant and machinery have no specific legal definition but bear their ordinary meaning in common English usage.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;"><span style="color: blue; font-size: large;"><b>Repairs..In Replacements....Out</b></span> Wilf has some machinery (not a tool) in need of repair. Will he still get a tax deduction for the cost when the renewals allowance goes? Yes: because the concession going only affects the<u> replacement</u> of machinery and not repairs to it.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;"><b style="color: red; font-size: x-large;">TRAP </b>If the plant and machinery is fixed to a building (forming so-called integral features), special rules apply. These say that if the repairs cost more than half of the original cost of the item, you can only claim capital allowances (CAs) and cannot treat the cost as an expense in your profit and loss account.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">(More details of integral features can be found <a href="http://www.hmrc.gov.uk/manuals/camanual/ca22320.htm" target="_blank">here</a> .)</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;"><b style="color: blue; font-size: x-large;">Replacement machinery </b>Most businesses don't use the renewals concession for the cost of machinery but claim CAs instead - HMRC's version of depreciation.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">Up to 31 March 2012, you can claim a maximum of £100,000 of the cost of machinery for an accounting year. (This limit drops to £25,000 for periods beginning on or after 1 April, 2012)</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">CAs on expenditure above these limits are spread over ten or more years.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">Where renewals allowance is claimed, you get tax relief sooner because the cost of a similar replacement (but not the first purchase) is claimed in full as a business expense against your profits for the accounting year in which you buy the replacement.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;"><b style="color: #38761d; font-size: x-large;">TIP </b>In the end both renewals allowance and CAs produce the same tax deduction - the difference being in the timing. The loss of renewals allowance won't increase most business' tax bill (with the exception below). If you are claiming renewals, switch to claiming CAs for future plant and machinery purchases.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;"><b style="color: red; font-size: x-large;">TRAP </b>No CA claim is possible on equipment (fridge, cooker etc.) used in let residential accommodation.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span><br />
<span style="font-family: Verdana, sans-serif;">Individuals instead can claim a wear and tear allowance of 10% of the ‘net rent’ . (For more details click <a href="http://www.hmrc.gov.uk/manuals/pimmanual/pim3200.htm" target="_blank">here</a> .)</span><br />
<span style="background-color: white; font-family: verdana, helvetica, arial, sans-serif; font-size: 13px; line-height: 16px;"><br /></span><br />
<span style="background-color: white; font-family: verdana, helvetica, arial, sans-serif; line-height: 16px;">Wear and tear allowance is not, however, available to companies so they will lose out when the renewals concession ends.</span><span style="background-color: white; font-family: verdana, helvetica, arial, sans-serif; font-size: 13px; line-height: 16px;"> </span>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com0Sandbach, Cheshire East CW11 4, UK53.1334355 -2.372723633.419602999999995 -42.8024111 72.847268 38.0569639tag:blogger.com,1999:blog-5738696637442028054.post-48632061597931786972011-12-29T14:53:00.005+00:002011-12-29T16:18:31.152+00:00Tax deduction for overdraft interest<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span style="color: purple; font-family: 'Trebuchet MS', sans-serif; font-size: large;"><b>Recently the Tax Tribunal faced the question whether overdraft interest paid by two directors to fund their company's business was claimable against their personal tax bills. Is it? </b></span><br />
<span style="font-family: 'Trebuchet MS', sans-serif; font-size: large;"><br /></span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;"><span style="font-size: large;"><b>Business Expenses</b> </span>It is not unusual for a company director to incur expenses on its behalf and for him to be reimbursed later. Usually this results in the company having a deduction for its cost and for the director the transactions are neutral. But HMRC took a different view when Mr and Mrs G (the Gs) took out a £1 million personal overdraft to fund their new company.</span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;"><b style="font-size: x-large;">Balancing transaction </b>This was no clever tax avoidance scheme, the Gs simply borrowed the money from the bank and used it to develop their business. They paid interest on the overdraft and the company simply reimbursed them that cost to balance the books. Trouble started When HMRC spotted that the company was not deducting tax from the interest payments it made to them and assessed it to collect the tax it should have deducted.</span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;"><b style="color: red; font-size: x-large;">TRAP </b>When a company pays interest to an individual, it must deduct basic rate tax, currently 20%, from the payment and hand this over each quarter to HMRC with a form CT61.</span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;"><b style="font-size: x-large;">Personal tax on interest </b>Their woes did not end there. HMRC checked the G's personal tax returns and noticed they contained no entries for the interest the company paid them. The G's argued the interest they received was balanced by what they paid to the bank. Whilst this was financially accurate, fiscally it was not because while the interest they received was taxable, the interest they paid was not tax deductible.</span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;"><b><span style="color: red; font-size: large;">TRAP</span></b> The law specifically rules out a tax deduction from general income for overdraft or credit card interest. It is only allowable against profits made by anyone who is self-employed or in partnership. Directors' earnings a employment income and thus no deduction is due.</span><br />
<br />
<div align="JUSTIFY" lang="en-US" style="margin-bottom: 0.18cm; margin-top: 0.18cm;">
<span style="font-family: 'Trebuchet MS', sans-serif;"><span style="color: black;"><span lang="en-GB">A
tax deduction from an individual’s general income is allowed for
interest paid where this relates to types of expenditure specified at
s</span></span><span style="color: black;"><span lang="en-GB"><b>.383
Income Taxes Act 2007</b></span></span><span style="color: black;"><span lang="en-GB">
(ITA). However, where the interest charged relates to the
“overdrawing” of an account or “credit card” or similar
arrangement no deduction is permitted; s</span></span><span style="color: black;"><span lang="en-GB"><b>.374
ITA</b></span></span><span style="color: black;"><span lang="en-GB">. </span></span></span>
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<span style="font-family: 'Trebuchet MS', sans-serif;"><b><span style="font-size: large;">No Choice for Tribunal</span></b> The Tribunal expressed great sympathy for the Gs but had no choice but to completely agree with HMRC with the following results:</span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<br />
<ol>
<li><span style="font-family: 'Trebuchet MS', sans-serif;">The Gs would be taxed on all the interest the company had paid them;</span></li>
<li><span style="font-family: 'Trebuchet MS', sans-serif;">They would receive no tax deduction for the interest they paid to the bank even though clearly for a business purpose, yet</span></li>
<li><span style="font-family: 'Trebuchet MS', sans-serif;">The company could claim a Corporation Tax deduction for the interest it paid to the Gs.</span></li>
</ol>
<div>
<span style="font-family: 'Trebuchet MS', sans-serif;"><b style="color: blue; font-size: x-large;">TAXTIP </b>The Gs could have avoided a tax bill if:</span></div>
<div>
<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<div>
<ol>
<li><span style="font-family: 'Trebuchet MS', sans-serif;">They had taken a personal loan instead of an overdraft.Interest on a loan to provide capital for your business is tax deductible.</span></li>
<li><span style="font-family: 'Trebuchet MS', sans-serif;">They had </span><u style="font-family: 'Trebuchet MS', sans-serif;">guaranteed</u><span style="font-family: 'Trebuchet MS', sans-serif;"> an overdraft or loan for the company.</span></li>
</ol>
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<span style="font-family: 'Trebuchet MS', sans-serif;"> </span><br />
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<span style="font-family: Verdana, sans-serif; font-size: large;"><br /></span>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com0Sandbach, Cheshire East CW11 4QA, UK53.1335482 -2.37332553.1311797 -2.3782389999999998 53.1359167 -2.368411tag:blogger.com,1999:blog-5738696637442028054.post-19914329165717442482011-12-14T09:00:00.000+00:002011-12-14T09:00:15.544+00:00Working From Home: Don’t Lose Private Residence Relief!<br />
<h2 style="background-color: white; clear: both; color: #2a518e; font-size: 30px; list-style-image: initial; list-style-position: initial; list-style-type: none; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 10px; padding-left: 0px; padding-right: 0px; padding-top: 5px; text-align: left; text-decoration: none;">
<em style="color: black; font-size: 14px; font-weight: normal; line-height: 19px; list-style-image: initial; list-style-position: initial; list-style-type: none; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify; text-decoration: none;"><strong style="list-style-image: initial; list-style-position: initial; list-style-type: none; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;"><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></strong></em></h2>
<h2 style="background-color: white; clear: both; list-style-image: initial; list-style-position: initial; list-style-type: none; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 10px; padding-left: 0px; padding-right: 0px; padding-top: 5px; text-align: left; text-decoration: none;">
<span style="font-weight: normal; line-height: 19px; list-style-image: initial; list-style-position: initial; list-style-type: none; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify; text-decoration: none;"><strong style="list-style-image: initial; list-style-position: initial; list-style-type: none; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;"><span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;">Working from home is increasingly popular, but could it affect your Capital Gains Tax (CGT) private residence relief when you come to sell?</span></strong></span></h2>
<div class="textpage_content" style="background-color: white; clear: both; line-height: 20px; list-style-image: initial; list-style-position: initial; list-style-type: none; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<div style="font-size: 14px; line-height: 18px; list-style-image: initial; list-style-position: initial; list-style-type: none; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;">
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<div style="line-height: 18px; list-style-image: initial; list-style-position: initial; list-style-type: none; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br style="list-style-image: initial; list-style-position: initial; list-style-type: none; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;" />Private residence relief is perhaps one of the best well-known tax reliefs . It allows you </span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">to sell your main home without triggering a liability to CGT. As with most reliefs, its availability depends on certain conditions being met.</span></div>
<div style="line-height: 18px; list-style-image: initial; list-style-position: initial; list-style-type: none; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br style="list-style-image: initial; list-style-position: initial; list-style-type: none; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;" />The relief applies to the disposal of a main residence. Where a person has more than one residence, he or she can choose which one is the main residence for the purposes of the relief. This does not have to be the one in which most time is spent and a person can chop and change which property is regarded as his or her main residence, although only one property can be the `main’ residence at any one time.</span></div>
<div style="line-height: 18px; list-style-image: initial; list-style-position: initial; list-style-type: none; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br style="list-style-image: initial; list-style-position: initial; list-style-type: none; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;" />Relief is provided from CGT on the disposal of all or part of a property that is, or has at any time in taxpayer’s ownership, been his or her only or main residence, together with land enjoyed with the property as a garden up to the permitted area.</span></div>
<div style="line-height: 18px; list-style-image: initial; list-style-position: initial; list-style-type: none; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;">
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<div style="line-height: 18px; list-style-image: initial; list-style-position: initial; list-style-type: none; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;">
<span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;"><strong style="list-style-image: initial; list-style-position: initial; list-style-type: none; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;">No Relief for Exclusive Business Use</strong></span></div>
<div style="line-height: 18px; list-style-image: initial; list-style-position: initial; list-style-type: none; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><strong style="list-style-image: initial; list-style-position: initial; list-style-type: none; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;"><br style="list-style-image: initial; list-style-position: initial; list-style-type: none; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;" /></strong>Private residence relief is not available for any part of the property that is used exclusively for business use. The key word here is exclusively and relief is only denied in respect of that part of the property that is used exclusively for business use. Where there is exclusive business use, any gain arising on the sale of the property must be apportioned and the proportion relating to exclusive business is taxed.</span></div>
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<div style="line-height: 18px; list-style-image: initial; list-style-position: initial; list-style-type: none; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span style="list-style-image: initial; list-style-position: initial; list-style-type: none; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span class="Apple-style-span" style="color: orange; font-size: large; font-weight: bold;">Example </span>Sue<span class="Apple-style-span" style="color: orange; font-size: large; font-weight: bold;"> </span></span>runs a business from home which has eight rooms one of which she uses exclusively as an office. When she sells the property, she makesrealises a gain of £80,000. One eighth (£10,000) would be charged to CGT. To the extent that her annual exemption (£10,100 for 2010/11) is available, this would shelter the gain with the result that no CGT is payable.</span></div>
<div style="line-height: 18px; list-style-image: initial; list-style-position: initial; list-style-type: none; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br style="list-style-image: initial; list-style-position: initial; list-style-type: none; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;" />The same considerations apply if a person is employed but works from home and sets aside a dedicated area exclusively for work.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span style="list-style-image: initial; list-style-position: initial; list-style-type: none; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;"><b style="color: blue; font-size: x-large;">Protecting the Exemption </b>R</span>elief is only lost where there is exclusive business use of part of the property. To protect the exemption, all you need do is ensure that any part of the home that is used for business purposes is also available for private use. For example, a room used as an office from which to run the business during the day could also be used by the children to do their homework in the evening.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br style="list-style-image: initial; list-style-position: initial; list-style-type: none; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;" />By ensuring that rooms used for business are also available for domestic use, it is possible both to work from home while ensuring that private residence relief remains available for the whole property.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><strong style="list-style-image: initial; list-style-position: initial; list-style-type: none; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;"><span class="Apple-style-span" style="color: blue; font-size: large;">Income Tax Dilemma </span></strong>While non-exclusive business use is a `good thing’ in protecting full entitlement to private residence relief, the same is not true from an income tax angle. Relief for expenses is available only to the extent that they are incurred wholly and exclusively in relation to that business.</span></div>
<div style="line-height: 18px; list-style-image: initial; list-style-position: initial; list-style-type: none; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br style="list-style-image: initial; list-style-position: initial; list-style-type: none; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;" />Where a room is used exclusively for business, a greater deduction is permitted. Where there is non-exclusive use, the permitted deduction is reduced as costs must be apportioned between business and domestic use.</span></div>
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</div>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com0tag:blogger.com,1999:blog-5738696637442028054.post-3941476396082287762011-12-13T09:41:00.000+00:002011-12-13T09:41:43.868+00:00VAT cheats deadline looms<br />
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Businesses have to register for VAT if their taxable turnover in the previous 12 months reaches the VAT registration limit (£73,000 from 1/4/11) or if they believe their turnover in the next thirty days will exceed the VAT registration limit.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">A recent HMRC campaign offered businesses that have not yet registered for VAT (and should have done so) the chance to come forward and make a disclosure under favourable terms.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Businesses had to notify HMRC by 30 September 2011 of their intention to make a voluntary VAT disclosure. Under the terms of the VAT initiative, businesses who have notified their intention to take part in the campaign must register for VAT by 31 December 2011. They will then receive their VAT registration number and instructions on how to complete their first VAT return. Once this has been submitted most businesses will face a lower penalty rate of 10% on late paid VAT.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">HMRC''s Head of Campaigns commented in the news release that:</span></div>
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<em><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">'We are determined to ensure everyone pays their fair share and, since September, have begun identifying people and companies who we believe are trading above the VAT threshold but have not come forward. We will be targeting these groups early in the New Year. I urge anyone with unpaid tax to use it to come forward and avoid potentially lengthy and costly investigations. The penalty they will pay will still be lower than when HMRC catches up with them.'</span></em></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">HMRC also previously announced that any taxpayer targeted by a previous campaign will not be able to use a subsequent campaign to disclose liabilities.</span></div>
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<br /></div>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com0tag:blogger.com,1999:blog-5738696637442028054.post-84953175806672295022011-12-09T13:44:00.001+00:002011-12-09T16:26:54.482+00:00Top Ten Tax Tips for Overseas Property Investors<br />
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<span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;"><strong>1. </strong><strong>Don't forget you still have UK tax to pay!</strong></span></div>
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<span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;"><strong><br /></strong></span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span class="Apple-style-span" style="color: #444444;">This is really more of a warning than a tip, but it is vital to remember that any UK resident individual buying </span><span class="Apple-style-span" style="color: black;">property </span><span class="Apple-style-span" style="color: #444444;">abroad is still exposed to UK tax on that </span><a href="http://www.theideasfactory.com/education/property/" style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; color: rgb(68, 68, 68) !important; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none; vertical-align: baseline;" title="property">property</a><span class="Apple-style-span" style="color: #444444;">. </span></span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span class="Apple-style-span" style="background-color: white; color: #444444;">This may include:</span></span></div>
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<li><span class="Apple-style-span" style="background-color: white; color: #444444; font-family: 'Trebuchet MS', sans-serif;">UK Income Tax on rental income, </span></li>
<li><span class="Apple-style-span" style="background-color: white; color: #444444; font-family: 'Trebuchet MS', sans-serif;">UK Capital Gains Tax on property sales and</span></li>
<li><span class="Apple-style-span" style="color: #444444; font-family: 'Trebuchet MS', sans-serif;"><span class="Apple-style-span" style="background-color: white;">UK Inheritance Tax on any foreign properties you leave to your children.</span></span></li>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">The UK tax burden is often greater than any foreign tax liabilities, so it makes sense to undertake UK tax planning for your foreign property. Many of the same planning techniques that work well on UK property can be used equally on foreign property, although the overseas angle adds an extra dimension and brings both additional opportunities and additional pitfalls to be wary of.</span></div>
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<strong><span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;">2. Main residence relief for foreign holiday homes</span></strong></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">There is nothing in the UK tax legislation to say that a foreign holiday home cannot be a UK resident individual's main residence for Capital Gains Tax purposes.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">A holiday home can be treated as your main residence by making an election to that effect, generally within two years of buying the property.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">The foreign property must be your own holiday home for at least part of the time but, by making the election, you will be able to exempt some or all of the capital gain on your foreign home from UK Capital Gains Tax.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Beware, however, that you're only allowed one main residence and, if you're married or in a civil partnership, you're only allowed one between you, so electing to treat your holiday home as your main residence could backfire if you sell your main house back in the UK.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">You can get the best of both worlds though, if you only elect to treat your foreign property as your main residence for a short period, say a week. How does this help? Well, since every main residence is also exempt for the last three years of ownership, that week buys you three years. In other words, you lose one week's worth of exemption on your main house but gain three years (and a week) of exemption on your foreign holiday home.</span></div>
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<strong><span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;">3. Travel at the Treasury's expense</span></strong></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span class="Apple-style-span" style="color: #444444;">If you're renting out foreign property, you have a foreign rental</span> <span class="Apple-style-span" style="color: black;">business</span><span class="Apple-style-span" style="color: #444444;">. Like any other business, you're entitled to claim tax relief for your business expenses. That includes any travel costs which you incur for business purposes.</span></span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Furthermore, all foreign property rentals are treated as one business. Hence, for example, you could claim the cost of going to Dubai to look for a possible new rental property against the rental income from a villa which you already have in Spain.</span></div>
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<strong><span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;">4. Understand the local taxes</span></strong></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Most countries will tax foreigners on any property they own in the country. Local taxes often apply to property purchases and sales, and to rental income. Furthermore, you will often have to pay annual taxes on foreign property, even if you do not rent it out, and many countries also have gift and death taxes.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">You will get double tax relief in the UK for any foreign tax on the same income or capital gains when the UK accepts that the foreign tax is broadly equivalent to the UK tax you are paying.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Beware, however, that every country has a different tax regime and not all of them are compatible with the UK tax system. If you suffer a foreign tax which is different in character to any UK tax, or which arises when no UK tax is due, you may not get any relief for it in the UK.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">So, a foreign tax at 30% which is deductible from your UK tax liability on the same income may actually cost you less than a foreign tax at 10% for which no double tax relief is available. All these factors need to be considered before you invest in foreign property.</span></div>
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<strong><span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;">5. Do you want double tax relief?</span></strong></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">As a general rule it is usually worth claiming double tax relief for any foreign taxes whenever you can. By claiming double tax relief, you deduct the amount of foreign tax paid from your UK tax liability.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">However, you cannot get any repayment of foreign tax through a double tax relief claim and the best you can ever do is to reduce your UK tax liability to nil.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Sometimes, the foreign tax may actually exceed the amount of the taxable income or capital gain for UK tax purposes. In these situations, it is better to claim the foreign tax as an expense rather than to claim double tax relief.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Where you claim foreign tax as an expense, it reduces the amount of the taxable income or capital gain and can even create a loss. This loss can be carried forward to give you future tax relief and hence, in some situations, can actually give you better value for your foreign tax than a double tax relief claim.</span></div>
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<strong><span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;">6. Reduce your foreign exchange tax risk</span></strong></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">All UK tax calculations for individual taxpayers are carried out in pounds sterling. This creates some particular problems when it comes to capital gains on foreign property. You may make very little gain in the local currency, but when you translate your purchase and sale costs back into sterling, you may have a big Capital Gains Tax exposure in the UK.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Let's say you buy a property in Utopia for 100,000 Utopian Dollars at a time when the exchange rate is two Utopian Dollars to the pound. That means you have a purchase cost of £50,000.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Later, you sell the property for 120,000 Utopian Dollars. In local terms, you have a modest gain of 20,000 Utopian Dollars. However, let us suppose that the exchange rate is now 1.2 Dollars to the pound. This means that your sale proceeds for UK Capital Gains Tax purposes are £100,000 and you have a taxable gain of £50,000.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Maybe that's fair: after all, if you bring the money back to the UK, you will have made a profit of £50,000 on your investment.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Beware, however, that if you hang on to your Utopian Dollars, they will become a new chargeable asset for UK Capital Gains Tax purposes and may give rise to a capital gain or capital loss when you eventually spend them or exchange them into sterling or any other currency.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">The real problem to watch is that if you make a capital loss on your foreign currency in a later UK tax year (year ended 5<sup>th</sup> April), you will not be able to set that loss off against the earlier capital gain on your foreign property.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">The tax tip here, therefore, is to make sure that you dispose of your foreign currency sale proceeds in the same UK tax year as you dispose of the foreign property itself.</span></div>
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<strong><span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;">7. Get VAT back with leaseback</span></strong></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">In the UK, we are accustomed to the idea that any purchase of residential property is exempt from VAT. This is not the case in every country, however, and many European countries charge VAT, at rates of up to 20%, on new residential property purchases.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">One way to recover the VAT on such a purchase is to enter into a 'leaseback' scheme. Under these schemes you, the owner, lease the property back to a hotel operator. This means that your property becomes a business property and you are able to recover the VAT. Typically, you are allowed a few weeks of personal use of the property each year and, eventually, after a suitable number of years, it is yours outright again.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">The scheme only works for certain types of property, such as hotel rooms and apartments, and may carry disadvantages for other foreign taxes, such as higher Income Tax rates; so it's one to investigate carefully before you sign up.</span></div>
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<strong><span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;">8. Borrow to save</span></strong></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Many countries impose Wealth Tax, Inheritance Tax, or both, on foreigners owning property in their country.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Wealth Tax is usually an annual charge on the property owner's net wealth in the country.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Foreign Inheritance Tax also usually applies only to a foreigner's net assets in the country.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">In most cases, you can reduce your net wealth in the foreign country for tax purposes by taking out a mortgage on your foreign property. In this way, it will usually be just your net equity in the property which attracts foreign tax.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">If you don't actually need a mortgage, you can invest the borrowed funds somewhere else outside the country where your property is located.</span></div>
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<strong><span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;">9. Avoid evasion</span></strong></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">When you buy property in a foreign country, you will usually also be acquiring tax obligations in that country. In fact, many countries require prospective foreign property purchasers to register themselves with the local tax authority before they can complete their purchase.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">If you want to sleep at night, you need to make sure that you fulfil your local tax obligations in the country where your property is situated. Many foreign tax authorities have the power to seize property where taxes are unpaid.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Naturally enough, the local tax authority will write to you in their own language. Do not ignore this correspondence just because you don't understand it: this is no defence. You will need local help and advice to make sure that you deal with the local tax authority appropriately and meet all of your obligations as a taxpayer in the country.</span></div>
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<strong><span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;">10. Expect the unexpected</span></strong></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">If the UK tax system is all Greek to you, or seems like Double Dutch, why should you expect foreign taxes to be any different? Every country has its own tax and legal system and, when you buy property abroad, you must abandon all of your preconceptions.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Assume nothing until you have investigated the local tax system thoroughly. Your destination country will have different taxes, different tax rates, a different tax year and a whole different set of rules, regulations, reliefs and exemptions.</span></div>
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Local property law and succession law is likely to be different too and a UK investor who overlooks this fact may suffer a great deal more than just tax!</span></div>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com2tag:blogger.com,1999:blog-5738696637442028054.post-73753234679449503252011-12-07T02:37:00.001+00:002011-12-09T11:19:35.976+00:00HMRC change mind on income shifting<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;"><b>HMRC's view used to be that interest earned on joint savings accounts by spouses must be taxed on a 50/50 basis. It has now quite clearly changed its view. Could this provide you and your spouse with an opportunity to reduce your joint tax bill?</b></span><br />
<span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;"><b><br /></b></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><b style="color: blue; font-size: x-large;">Old fashioned values </b>Until fairly recently, a wife's income for tax purpose was treated as if it was her husband's. In 1980 this antediluvian view was replaced with "independent taxation". Its rules atre straightforward if the income of each spouse arises in their own name solely.However, life becomes tricky where income arises from jointly owned assets such as a joint savings account.</span><br />
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span class="Apple-style-span" style="color: blue; font-size: large;"><b>Joint asset rules</b></span> If you;re married, you know the line between what's yours and what's your spouse's can be hazy. HMRC know this and have rules to prevent couples from declaring income from jointly-owned assets in ways to produce the lowest tax bill for them.</span><br />
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><b style="color: red; font-size: x-large;">TRAP</b> Even if an asset is held in unequal shares by a married couple S.836 of the Income Taxes Act 1987 treats the income from it for tax purposes as if received equally. This may result in one spouse paying tax on income which isn't theirs. There are exceptions to this rule.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><b><span class="Apple-style-span" style="color: blue; font-size: large;">Tax planning election </span></b> Where the ownership of an asset is other than 50/50, a married couple can elect to be taxed on their actual share of the income it produces. The election must be made in the correct format on Form 17 (which can be downloaded <a href="http://www.hmrc.gov.uk/forms/form17.pdf" target="_blank">here</a> ) and submitted within a fairly tight deadline.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><b><span class="Apple-style-span" style="color: blue; font-size: large;">Form 17 procedure </span></b></span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif; line-height: 12px;">You
can use a Form 17 to declare a beneficial interest if you hold
property with your spouse jointly and you:</span><br />
<div style="margin-bottom: 0cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<ul>
<li><div lang="en-US" style="margin-bottom: 0cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">own
the property in unequal shares</span></div>
</li>
<li><div lang="en-US" style="margin-bottom: 0cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">are
entitled to the income arising in proportion to those shares</span></div>
</li>
<li><div lang="en-US" style="margin-bottom: 0cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">want
to be taxed on that basis.</span></div>
</li>
</ul>
<div lang="en-US" style="margin-bottom: 0cm; margin-left: 1.27cm;">
</div>
<div lang="en-US" style="margin-bottom: 0cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">A
form 17 can’t be used to allocate income for tax purposes in
respect of:</span></div>
<div lang="en-US" style="margin-bottom: 0cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<ul>
<li><div lang="en-US" style="margin-bottom: 0cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">partnership
income</span></div>
</li>
<li><div lang="en-US" style="margin-bottom: 0cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">rental
income from letting of furnished holiday accommodation</span></div>
</li>
<li><div lang="en-US" style="margin-bottom: 0cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">dividends
from shares in a close company</span></div>
</li>
<li><div lang="en-US" style="margin-bottom: 0cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">income
which for tax purposes is treated as belonging to someone else even
if it arises from property held in joint names</span></div>
</li>
<li><div lang="en-US" style="margin-bottom: 0cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">property
held as beneficial joint tenants where you are both entitled to the
whole of the property and income.</span></div>
</li>
</ul>
<div lang="en-US" style="margin-bottom: 0cm; margin-left: 1.27cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<div lang="en-US" style="margin-bottom: 0.11cm;">
<span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;"><b>Procedure
and time limit </b></span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Once
completed a Form 17 must be sent to HMRC within 60 days of the
date of declaration. This deadline will not be extended for any
reason.</span></div>
<div lang="en-US" style="margin-bottom: 0cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<div lang="en-US" style="margin-bottom: 0cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span style="color: black;">With
the form send documents which show how the proportions of beneficial
interest shown were arrived at. If the proportions change for any
reason notify HMRC straightaway. </span>
</span></div>
<div lang="en-US" style="margin-bottom: 0cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><b style="color: red; font-size: x-large;">TRAP</b><span style="color: black;"> Until June 2011 HMRC claimed an election couldn't be made in respect of interest on a joint bank or savings account. Their view was that as the money in joint accounts is accessible by either spouse, the ownership was equal and the 50/50 split applies.</span></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span style="color: black;"><br /></span></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><b style="color: blue; font-size: x-large;">Rethink on ownership </b>HMRC's 50/50 approach is out of step with general law which takes several factors into account in deciding who owns money in a joint account. A recent tribunal case confirmed that interest on a joint account can be attributable in unequal proportions.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><b style="color: blue; font-size: x-large;">Trust is important </b>Where both spouse pay in and withdraw money from a joint account, it may be almost impossible to say how much of the balance each owns. It is equally impossible to say how much interest each is entitled to. There is a simple solution to this problem.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><b style="color: #6aa84f; font-size: x-large;">TaxTip </b>If you want interest on joint account to be taxed otherwise than on a 50/50 basis, draw up a simple trust signed by you and your wife indicating how the capital and thus the interest is owned. You can then make a form 17 election specifying how the interest is to be allocated for tax purposes.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="color: orange; font-family: 'Trebuchet MS', sans-serif; font-size: large;"><b>Example statement of trust </b></span><br />
<span class="Apple-style-span" style="color: orange; font-family: 'Trebuchet MS', sans-serif; font-size: large;"><b><br /></b></span><br />
<br />
<div align="JUSTIFY" lang="en-GB" style="margin-bottom: 0cm;">
<span style="font-family: 'Trebuchet MS', sans-serif;"><b>Bank
account at ABC Bank Plc (number 01234568)</b></span></div>
<div align="JUSTIFY" lang="en-GB" style="margin-bottom: 0cm;">
<br /></div>
<div align="JUSTIFY" lang="en-GB" style="margin-bottom: 0cm;">
<span style="font-family: 'Trebuchet MS', sans-serif;">Mr
John X (J) and Mrs Susan X (S) are the joint legal and beneficial
owners of the above named account (the account) and, in
accordance with the terms and conditions of the operation of the
account as set out and varied from time to time by the bank, have
equal and several rights over the money in it. </span>
</div>
<div align="JUSTIFY" lang="en-GB" style="margin-bottom: 0cm;">
<br /></div>
<div align="JUSTIFY" lang="en-GB" style="margin-bottom: 0cm;">
<span style="font-family: 'Trebuchet MS', sans-serif;">J
and S both contribute money to and withdraw money from the account.
While recognising this J and S agree that from the date of this
agreement unless revoked the money held in the account at any time shall be
beneficially owned as follows:</span></div>
<div align="JUSTIFY" lang="en-GB" style="margin-bottom: 0cm;">
<br /></div>
<ul>
<li><div align="JUSTIFY" lang="en-GB" style="margin-bottom: 0cm;">
<span style="font-family: 'Trebuchet MS', sans-serif;">J
20%</span></div>
</li>
<li><div align="JUSTIFY" lang="en-GB" style="margin-bottom: 0cm;">
<span style="font-family: 'Trebuchet MS', sans-serif;">S
80% </span>
</div>
</li>
</ul>
<div align="JUSTIFY" lang="en-GB" style="margin-bottom: 0cm;">
<br /></div>
<h1 align="JUSTIFY" class="western" lang="en-GB">
<span style="font-family: 'Trebuchet MS', sans-serif;">Interest</span></h1>
<div align="JUSTIFY" lang="en-GB" style="margin-bottom: 0cm;">
<br /></div>
<div align="JUSTIFY" lang="en-GB" style="margin-bottom: 0cm;">
<span style="font-family: 'Trebuchet MS', sans-serif;">All
interest paid or accrued in respect of money held in the account will
be due to J and S in proportion to their respective beneficial
ownership as determined by this agreement.</span></div>
<div lang="en-GB" style="margin-bottom: 0cm;">
<br /></div>
<div lang="en-GB" style="margin-bottom: 0cm;">
<br /></div>
<div lang="en-GB" style="margin-bottom: 0cm;">
<span style="font-family: 'Trebuchet MS', sans-serif;">Signature………………………..
Name…………………… Date…………… </span>
</div>
<div lang="en-GB" style="margin-bottom: 0cm;">
<br /></div>
<div lang="en-GB" style="margin-bottom: 0cm;">
<br /></div>
<div lang="en-GB" style="margin-bottom: 0cm;">
<span style="font-family: 'Trebuchet MS', sans-serif;">Signature………………………..
Name…………………… Date……………</span><br />
<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span style="color: cyan; font-family: 'Trebuchet MS', sans-serif; font-size: large;"><b>Throughout this article please construe references to couple(s), spouse(e) and marriage as including civil partnerships.</b></span></div>
<div lang="en-GB" style="margin-bottom: 0cm;">
<br /></div>
<div lang="en-GB" style="margin-bottom: 0cm;">
<br /></div>
<div lang="en-GB" style="margin-bottom: 0.18cm; margin-top: 0.18cm;">
<br /></div>
<br />
<span class="Apple-style-span" style="color: orange; font-family: 'Trebuchet MS', sans-serif; font-size: large;"><b><br /></b></span><br />
<span class="Apple-style-span" style="color: orange; font-family: 'Trebuchet MS', sans-serif; font-size: large;"><b><br /></b></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<div lang="en-US" style="margin-bottom: 0cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<div style="margin-bottom: 0cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<div style="margin-bottom: 0cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<div lang="en-US" style="margin-bottom: 0.18cm; margin-top: 0.18cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<div lang="en-US" style="margin-bottom: 0.18cm; margin-top: 0.18cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<div style="margin-bottom: 0cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<div lang="en-GB" style="margin-bottom: 0cm;">
<br /></div>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com1tag:blogger.com,1999:blog-5738696637442028054.post-35210455032935361432011-12-05T10:30:00.000+00:002011-12-09T11:21:08.757+00:00When can you rely on what HMRC say<br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;"><b>Recently, a landmark Supreme Court decision wemt against a taxpayerwho had relied on adfvice included in a HMRC booklet. So where are you if you follow HMRC's rules but they later change their mind?</b></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="background-color: white; color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;">Gaines losses </span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Mr Gaines Cooper(GC) spent the best part of 30 years living abroad and followed advice published by HMRC in its IR20 booklet (now Booklet 6). Yet HMRC still contended he was resident in UK for tax purposes. The case raises an important question for us all. When can you rely on information contained in the various documents HMRC publish?</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span class="Apple-style-span" style="color: blue; font-size: large;"><b>By the book</b></span> </span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">The case actually involved three taxpayers who had relied on HMRC guidance contained in IR20. All claimed they had satisfied the conditions to qualify as not resident in UK for tax purposes and thus were not liable to UK tax on their income arising outside the UK. The big problem is that there is currently no statutory definition of tax residence. So greedily eyeing the huge amounts of tax at stake, HMRC argued against their own guidance and claimed all three taxpayers were UK resident. </span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span class="Apple-style-span" style="color: red; font-size: large;"><b>TRAP </b></span>Some reports have implied that following this judgement. advice in HMRC's publications is worthless. That is not true but you need to take some precautions before following it.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span class="Apple-style-span" style="color: blue; font-size: large;">Be reasonable</span> </span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">The Supreme Court took the view that HMRC's guidance and publications are a vital part of its relationship with taxpayers and HMRC were bound by what it had said in its publications. GC and the others lost because they had misinterpteted the published guidance. However, HMRC had not been sufficiently clear and should provide clear, unambiguous advice in all its publications. One judge commented that ordinary taxpayers should feel no need to go beyond HMRC's published advice. HMRC will doubtless take their time in updating their publications to meet this goal but where is the taxpayer left in the interim?</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span class="Apple-style-span" style="color: blue; font-size: large;"><b>Public or internal guidance</b></span> </span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Booklets, notices and HMRC statements of practice intended for the general public can be relied upon and tribunals and courts will back you up if HMRC decide to change their mind. However, this does not hold good for HMRC's staff instruction manuals on their web site. Mostly, these will tie up with their publications but where a difference exists, rely only on what is written for the taxpayer.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><b><span class="Apple-style-span" style="color: red; font-size: large;">TRAP</span></b> You cannot cherry pick the bits of advice you like and ignore those you don't. This may end up with you not acieving the tax result you wanted. Follow the published guidance in full.</span><br />
<br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><b><span class="Apple-style-span" style="color: blue; font-size: large;">Contemporaneous record</span><span class="Apple-style-span" style="font-size: large;">s</span></b> HMRC's advice is constantly changing. Online publications may alter before you next refer to them - slightly awkward if you are arguing against HMRC's updated view.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><b><span class="Apple-style-span" style="color: #6aa84f; font-size: large;">TaxTip </span></b>Keep a PDF or hard copy of HMRC web pages you used in making a particular decision. If you phone HMRC for advice, ask which public notice or instruction the taxman bases his view on.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><b><span class="Apple-style-span" style="color: blue; font-size: large;">Conclusion</span></b> You can rely on HMRC advice contained in public notices (but not online manuals). Follow this to the letter to be sure you get the tax result you want. HMRC's publications and views change often, so keep a hard copy of any web pages you rely on. </span>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com0tag:blogger.com,1999:blog-5738696637442028054.post-8965134443344914932011-12-03T01:31:00.001+00:002011-12-06T12:21:33.374+00:00Alternative to associated companies<span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;"><b><br /></b></span><br />
<span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;"><b>You may have good commercial reasons for running different parts of your business through separate companies, but this may lead to higher tax bills. Why is this and how can you avoid it?</b></span><br />
<span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;"><b><br /></b></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><b style="color: blue; font-size: x-large;">More than one trade </b>It is not unusual to find more than one business using the same premises. The owners may have started one trade successfully and then branched out into others placing each new trade into a new, separate company with its own identity. This may seem a perfectly logical business structure but it could cost the businesses extra tax.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><b style="color: blue; font-size: x-large;">Associated Tax </b>For corporation tax purposes a company is connected with another company if both are controlled by the same owners. These are called associated companies. A company may make taxable profits of up to £300,000 in a year and be taxed on them at the Small Companies Rate (SPR) of 20%. Thereafter, the higher rate of 27.5% is used. However, where two or more companies are associated, the SPR band is split equally between them.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="color: orange; font-family: 'Trebuchet MS', sans-serif;"><b><span class="Apple-style-span" style="font-size: large;">Example</span></b> </span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">Two associated companies A Ltd and B Ltd have taxable profits of £250,000 and £50,000 respectively for the same year. Overall their profits amount to £300,000 which would be taxed at 20% if they were not associated to produce a tax bill of £60,000. But because the SPR is split equally between them, A is taxed at 20% on its first £150,000 profits (£300,000/2) - £30,000 - but at 27.5% on the remaining £100,000 - £27,500 to produce a tax bill of £57,500. As B's profits are only £50,000 they are taxed at 20% - £10,000. This produces a total tax bill of £67,500 for A and B Ltd. How can this increased tax burden be avoided?</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><b style="color: blue; font-size: x-large;">Profit Sharing </b>Running the companies separately produces an increase in their joint tax bill of £7,500. Shifting profits may help to resolve this. B Ltd could charge A Ltd for services it provides eg supplying staff or accommodation. But the services provided must justify the amount of any such charge as B can only charge for services it actually provides. This may limit profit shifting opportunities.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><b><span class="Apple-style-span" style="color: #38761d; font-size: large;">TaxTip</span></b> A and B Ltd could merge and operate each business through just one company and thus take full advantage of the lower 20% rate. Their businesses would be carried out in separate divisions within the same company.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">They can retain their respective trading names as far as their customers and suppliers are concerned although they would need to make changes to the company stationery. Click <a href="http://jponton.blogspot.com/2011/12/what-must-be-on-company-stationery.html" target="_blank">here </a> to see what needs to appear on company stationery.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">They can even prepare separate accounts so that directors and shareholders can see how each is performing.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span class="Apple-style-span" style="color: blue; font-size: large;"><b>Divisional caveat</b></span> However, there other considerations than tax to take into account. If one division is in danger of failing , its creditors can look for payment from the company as a whole not just from the division owing them the money,</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
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<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;"><b><br /></b></span><br />
<span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;"><b><br /></b></span><br />
<span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;"><b><br /></b></span><br />
<span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;"><b><br /></b></span>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com0tag:blogger.com,1999:blog-5738696637442028054.post-69841602297480522882011-12-02T10:30:00.000+00:002012-02-07T17:14:30.471+00:00Winding up concessions go<b><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif; font-size: large;"><br /></span></b><br />
<b><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif; font-size: large;">HMRC's concession for companies closing down is to go - probably in April 2012.</span></b><br />
<b><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif; font-size: large;">The Treasury Solicitor's Department (TSD) has just abolished their equivalent concession from October 14, 2011. Does this mean higher tax bills for shareholders?</span></b><br />
<b><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif; font-size: large;"><br /></span></b><br />
<span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large; font-weight: bold;">Tax efficient wind up </span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">When you want to close down your company, you will want to do it in the most tax-efficient way. Both HMRC and TSD have parts to play in achieving this but if you don't stick to their rules you could end up with a big tax bill or even lose the company's assets to the Crown.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><b style="color: blue; font-size: x-large;">Tax Concession </b>Unless a company is formally liquidated any cash or assets it passes to its shareholders in the closure are taxable as income at the taxpayer's highest rate.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">HMRC's Extra Statutory Concession C16 (ESC C16) says the transfer may be treated as a capital payment liable to capital gains tax (if at all) at rates of between 10% and 20%.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">ESC 16 is due to be withdrawn next April and replaced by a less generous law.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">In the meantime it can save shareholders substantial amounts of tax.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><b style="color: blue; font-size: x-large;">TSD Concession</b> Until 14 October 2011, TSD had a similar concession. By law, if assets are distributed and the company subsequently struck off without a formal liquidation, the assets become Crown property. This is known as bona vacantia.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">The TSD concession said bona vacantia did not apply where the company's share capital was less than £4,000.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">However, there is an alternative under the Companies Act 2006 wherby you can, for example, transfer the company's share capital and reserves (accumulated profit) leaving just £1's worth. It is this remaining £1 which is at risk of becoming bona vacantia if a formal liquidation is not carried out. However, this procedure may cause trouble with ESC C16.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><b style="color: blue; font-size: x-large;">Tax concession also ending </b>Although ESC C16 is not likely to be revoked until April 2012, the removal of the TSD concession could pose a tax problem for any company intending to close down without a formal liquidation.</span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><b style="background-color: white; font-size: x-large;"><span class="Apple-style-span" style="color: blue;">Usual method</span></b><span style="background-color: white;"><span class="Apple-style-span" style="color: blue; font-size: large; font-weight: bold;"> </span><span class="Apple-style-span">A company using ESC C16 must ask HMRC to agree that transfers of its assets to shareholders before the company is struck off can be treated as capital payments. The company can then distribute its assets whilst leaving its share capital intact. To stop the bona vacantia problem, the company must first use the Companies Act 2006 procedure to reduce its share capital. ESC C16 does not apply to this type of distribution but only to a<i> "distribution of assets" , </i>not share capital. An awkward inspector might take this point in an attempt to deny relief under ESC C16. It is advisable, therefore, to explain to HMRC that the reduction of share capital is simply part of the process of closing down the company before strike-off and therefore should be covered by the concession.</span></span></span><br />
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;"><span style="background-color: white;"><span class="Apple-style-span"><br /></span></span></span><br />
<br />
<div align="JUSTIFY" style="margin-bottom: 0cm;">
<span class="Apple-style-span" style="color: blue; font-family: 'Trebuchet MS', sans-serif; font-size: large;"><b>Companies
Act 2006 Procedure </b></span><span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">The first step is for the
company to pass a special resolution; this needs agreement from 75%
of the shareholders. In addition the directors will need to provide a
solvency statement. This requires each of them to confirm that
there's no reason why the company can't meet its debts and that it
will be able to pay them as they fall due within twelve months of the
statement. The statement must:</span></div>
<ul>
<li><div align="JUSTIFY" lang="en-US" style="margin-bottom: 0.18cm; margin-top: 0.18cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">be in writing</span></div>
</li>
<li><div align="JUSTIFY" lang="en-US" style="margin-bottom: 0.18cm; margin-top: 0.18cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">show the date it’s made</span></div>
</li>
<li><div align="JUSTIFY" lang="en-US" style="margin-bottom: 0.18cm; margin-top: 0.18cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">state that the company’s
solvency statement is made in accordance with s.642 of the Companies
Act 2006</span></div>
</li>
<li><div align="JUSTIFY" lang="en-US" style="margin-bottom: 0.18cm; margin-top: 0.18cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">contain the name of each
director, and be signed by each of them.</span></div>
</li>
</ul>
<div align="JUSTIFY" lang="en-US" style="margin-bottom: 0.18cm; margin-top: 0.18cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">The resolution and the solvency
statement must then be sent to Companies House within 15 days of
being passed, together with a statement of capital showing how the
share capital has been reduced.</span></div>
<div align="JUSTIFY" lang="en-US" style="margin-bottom: 0.18cm; margin-top: 0.18cm;">
<span class="Apple-style-span" style="font-family: 'Trebuchet MS', sans-serif;">You can find more information
on the procedure for making company resolutions here:</span></div>
<div lang="en-US" style="margin-bottom: 0.18cm; margin-top: 0.18cm; text-align: justify;">
<span style="color: blue; font-family: 'Trebuchet MS', sans-serif;"><u><a href="http://www.companieshouse.gov.uk/about/gbhtml/gp3.shtml">http://www.companieshouse.gov.uk/about/gbhtml/gp3.shtml</a></u></span><br />
<span style="color: blue; font-family: 'Trebuchet MS', sans-serif;"><br /></span><br />
<div style="text-align: center;">
<span style="color: blue; font-family: 'Trebuchet MS', sans-serif;">---------------------------------------------------------------------------------------------------------------</span></div>
<div style="text-align: center;">
<span style="color: blue; font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<div style="text-align: left;">
<span style="font-family: 'Trebuchet MS', sans-serif;">HMRC have now published a draft of the legislation which will replace ESC 16</span></div>
<div style="text-align: left;">
<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<blockquote class="tr_bq">
<h2 class="LegP1GroupTitle" style="background-attachment: initial; background-clip: initial; background-color: white; background-image: none; background-origin: initial; border-bottom-style: none; border-color: initial; border-image: initial; border-left-style: none; border-right-style: none; border-top-style: none; border-width: initial; clear: both; line-height: 1.2em; margin-bottom: 0.5em; margin-left: 0px; margin-right: 0px; margin-top: 0em; padding-top: 1.5em;">
<span style="font-family: Verdana, sans-serif; font-size: small;">Distributions in respect of share capital prior to dissolution of company: corporation tax</span></h2>
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="article-16-1" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
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<span style="font-family: Verdana, sans-serif;"><span class="LegP1No" id="article-16" style="font-weight: bold; letter-spacing: 0em;">16.</span>—(1) In Part 23 of the Corporation Tax Act 2010(<a class="LegFootnoteRef" href="http://www.legislation.gov.uk/ukdsi/2012/9780111519134/article/16#f00019" id="Backf00019" style="color: #2790c4; font-weight: bold; letter-spacing: 0em; line-height: 1.4em; text-decoration: none;" title="Go to footnote 1">1</a>) (company distributions), Chapter 3 (matters which are not distributions) is amended as follows.</span></div>
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="article-16-2" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
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<span style="font-family: Verdana, sans-serif;">(2) In section 1029(1) (overview of Chapter), after paragraph (a) insert—</span></div>
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
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<span class="LegDS LegLHS LegP3NoAmend" style="display: block; float: left; letter-spacing: 0em; text-align: right; width: 127px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;"><span class="LegAmendQuote" style="letter-spacing: 0em;">“</span>(aa)</span></span></span><span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">section 1030A (distributions in respect of share capital </span></span></span></div>
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<div class="LegClearFix LegP3Container" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-align: -webkit-auto; width: 748px;">
<span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">prior to dissolution of company),<span class="LegAmendQuote" style="letter-spacing: 0em;">”</span>.</span></span></span></div>
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="article-16-3" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
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<span style="font-family: Verdana, sans-serif;">(3) After section 1030 insert—</span></div>
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<span class="LegPblockTitle LegAmend" style="display: block; font-style: italic; letter-spacing: 0em; margin-left: 10%; margin-top: 0em; text-align: center;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif; font-size: small;"><span class="LegAmendQuote" style="font-style: normal; letter-spacing: 0em;">“</span>Distributions prior to dissolution of company</span></span></span></h3>
<h4 class="LegP1GroupTitleFirst LegAmend" style="background-color: white; clear: both; line-height: 1.2em; margin-bottom: 0.5em; margin-left: 10%; margin-right: 0px; margin-top: 0em; padding-top: 0em;">
<span style="font-family: Verdana, sans-serif;"><span class="LegAmendingText" style="letter-spacing: 0em;">1030A</span> <span class="LegAmendingText" style="letter-spacing: 0em;">Distributions in respect of share capital prior to dissolution of company</span></span></h4>
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
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<span style="font-family: Verdana, sans-serif;"><span class="LegAmendingText" style="letter-spacing: 0em;">(1)</span> <span class="LegAmendingText" style="letter-spacing: 0em;">This section applies where—</span></span></div>
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
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<span class="LegDS LegLHS LegP3NoAmend" style="display: block; float: left; letter-spacing: 0em; text-align: right; width: 127px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">(a)</span></span></span><span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span style="font-family: Verdana, sans-serif;"><span class="LegAmendingText" style="letter-spacing: 0em;">the procedure in section 1000 of the Companies Act </span></span></span></div>
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<span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span style="font-family: Verdana, sans-serif;"><span class="LegAmendingText" style="letter-spacing: 0em;">2006 </span></span><span style="background-color: white; font-family: Verdana, sans-serif; letter-spacing: 0em;">(<a class="LegFootnoteRef" href="http://www.legislation.gov.uk/ukdsi/2012/9780111519134/article/16#f00020" id="Backf00020" style="color: #2790c4; font-weight: bold; letter-spacing: 0em; line-height: 1.4em; text-decoration: none;" title="Go to footnote 2">2</a>)<span class="LegAmendingText" style="letter-spacing: 0em;"> (power to strike off company not carrying</span></span></span></div>
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<span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span style="background-color: white; font-family: Verdana, sans-serif; letter-spacing: 0em;"><span class="LegAmendingText" style="letter-spacing: 0em;"> on business</span></span><span style="background-color: transparent; letter-spacing: 0em;"> </span></span></div>
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<div class="LegClearFix LegP3Container" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-align: -webkit-auto; width: 748px;">
<span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span style="font-family: Verdana, sans-serif;"><span class="LegAmendingText" style="letter-spacing: 0em;"> or in operation) has been commenced in relation to a</span></span><span style="background-color: transparent;"> </span></span></div>
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<span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span style="font-family: Verdana, sans-serif;"><span class="LegAmendingText" style="letter-spacing: 0em;">company, and</span></span></span></div>
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
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<span class="LegDS LegLHS LegP3NoAmend" style="display: block; float: left; letter-spacing: 0em; text-align: right; width: 127px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">(b)</span></span></span><span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">the company makes a distribution in respect of share </span></span><span style="background-color: transparent;"> </span></span></div>
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<span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span style="background-color: white; font-family: Verdana, sans-serif; letter-spacing: 0em;">capital </span><span style="background-color: white; font-family: Verdana, sans-serif; letter-spacing: 0em;">in anticipation of its dissolution under that section.</span></span></div>
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<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
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<span style="font-family: Verdana, sans-serif;"><span class="LegAmendingText" style="letter-spacing: 0em;">(2)</span> <span class="LegAmendingText" style="letter-spacing: 0em;">This section also applies where—</span></span></div>
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
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<span class="LegDS LegLHS LegP3NoAmend" style="display: block; float: left; letter-spacing: 0em; text-align: right; width: 127px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">(a)</span></span></span><span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">a company intends to make, or has made, an application</span></span></span></div>
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<blockquote class="tr_bq">
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<span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">under section 1003 of that Act (striking off on application</span></span></span></div>
</blockquote>
<blockquote class="tr_bq">
<div class="LegClearFix LegP3Container" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-align: -webkit-auto; width: 748px;">
<span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">by company), and</span></span></span></div>
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
<div class="LegClearFix LegP3Container" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-align: -webkit-auto; width: 748px;">
<span class="LegDS LegLHS LegP3NoAmend" style="display: block; float: left; letter-spacing: 0em; text-align: right; width: 127px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">(b)</span></span></span><span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">the company makes a distribution in respect of share </span></span></span></div>
</blockquote>
<blockquote class="tr_bq">
<div class="LegClearFix LegP3Container" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-align: -webkit-auto; width: 748px;">
<span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">capital in anticipation of its dissolution under that section.</span></span></span></div>
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
<div class="LegP2ParaText LegAmend" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-left: 10%; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-indent: 1em;">
<span style="font-family: Verdana, sans-serif;"><span class="LegAmendingText" style="letter-spacing: 0em;">(3)</span> <span class="LegAmendingText" style="letter-spacing: 0em;">The distribution is not a distribution of a company for the purposes of the Corporation Tax Acts if conditions A and B are met (but see section 1030B).</span></span></div>
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
<div class="LegP2ParaText LegAmend" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-left: 10%; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-indent: 1em;">
<span style="font-family: Verdana, sans-serif;"><span class="LegAmendingText" style="letter-spacing: 0em;">(4)</span> <span class="LegAmendingText" style="letter-spacing: 0em;">Condition A is that, at the time of the distribution, the company—</span></span></div>
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
<div class="LegClearFix LegP3Container" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-align: -webkit-auto; width: 748px;">
<span class="LegDS LegLHS LegP3NoAmend" style="display: block; float: left; letter-spacing: 0em; text-align: right; width: 127px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">(a)</span></span></span><span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">intends to secure, or has secured, the payment of any</span></span></span></div>
</blockquote>
<blockquote class="tr_bq">
<div class="LegClearFix LegP3Container" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-align: -webkit-auto; width: 748px;">
<span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">sums due to the company, and</span></span></span></div>
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
<div class="LegClearFix LegP3Container" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-align: -webkit-auto; width: 748px;">
<span class="LegDS LegLHS LegP3NoAmend" style="display: block; float: left; letter-spacing: 0em; text-align: right; width: 127px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">(b)</span></span></span><span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">intends to satisfy, or has satisfied, any debts or liabilities</span></span></span></div>
</blockquote>
<blockquote class="tr_bq">
<div class="LegClearFix LegP3Container" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-align: -webkit-auto; width: 748px;">
<span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">of </span></span><span style="background-color: white; font-family: Verdana, sans-serif; letter-spacing: 0em;">the company.</span></span></div>
</blockquote>
<blockquote class="tr_bq">
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
<div class="LegP2ParaText LegAmend" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-left: 10%; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-indent: 1em;">
<span style="font-family: Verdana, sans-serif;"><span class="LegAmendingText" style="letter-spacing: 0em;">(5)</span> <span class="LegAmendingText" style="letter-spacing: 0em;">Condition B is that—</span></span></div>
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
<div class="LegClearFix LegP3Container" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-align: -webkit-auto; width: 748px;">
<span class="LegDS LegLHS LegP3NoAmend" style="display: block; float: left; letter-spacing: 0em; text-align: right; width: 127px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">(a)</span></span></span><span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">the amount of the distribution, or</span></span></span></div>
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
<div class="LegClearFix LegP3Container" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-align: -webkit-auto; width: 748px;">
<span class="LegDS LegLHS LegP3NoAmend" style="display: block; float: left; letter-spacing: 0em; text-align: right; width: 127px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">(b)</span></span></span><span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">in a case where the company makes more than one </span></span></span></div>
</blockquote>
<blockquote class="tr_bq">
<div class="LegClearFix LegP3Container" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-align: -webkit-auto; width: 748px;">
<span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">distribution falling within subsection (1)(b) or (2)(b), </span></span></span></div>
</blockquote>
<blockquote class="tr_bq">
<div class="LegClearFix LegP3Container" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-align: -webkit-auto; width: 748px;">
<span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">the </span></span><span class="LegAmendingText" style="background-color: white; letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">total amount of the distributions, </span></span><span style="background-color: white; font-family: Verdana, sans-serif; letter-spacing: 0em;">does not exceed</span><span style="background-color: transparent;"> </span></span></div>
</blockquote>
<blockquote class="tr_bq">
<div class="LegClearFix LegP3Container" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-align: -webkit-auto; width: 748px;">
<span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span style="background-color: white; font-family: Verdana, sans-serif; letter-spacing: 0em;"> £25,000.</span></span></div>
</blockquote>
<blockquote class="tr_bq">
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
<div class="LegP2ParaText LegAmend" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-left: 10%; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-indent: 1em;">
<span style="font-family: Verdana, sans-serif;"><span class="LegAmendingText" style="letter-spacing: 0em;">(6)</span> <span class="LegAmendingText" style="letter-spacing: 0em;">In the case of a company incorporated in a territory outside the United Kingdom, any reference in subsection (1) or (2) to a section of the Companies Act 2006 is to be read as a reference to any provision of the law of that territory corresponding to that section.</span></span></div>
<h4 class="LegP1GroupTitle LegAmend" style="background-color: white; clear: both; line-height: 1.2em; margin-bottom: 0.5em; margin-left: 10%; margin-right: 0px; margin-top: 0em; padding-top: 1.5em;">
<span style="font-family: Verdana, sans-serif;"><span class="LegAmendingText" style="letter-spacing: 0em;">1030B</span> <span class="LegAmendingText" style="letter-spacing: 0em;">Section 1030A: effect of company not being dissolved, </span><abbr style="letter-spacing: 0em;" title="Et cetera"><span class="LegAmendingText" style="letter-spacing: 0em;"><span lang="la" style="letter-spacing: 0em;" xml:lang="la">etc</span></span></abbr></span></h4>
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
<div class="LegP2ParaText LegAmend" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-left: 10%; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-indent: 1em;">
<span style="font-family: Verdana, sans-serif;"><span class="LegAmendingText" style="letter-spacing: 0em;">(1)</span> <span class="LegAmendingText" style="letter-spacing: 0em;">Where this section applies, a distribution made by a company is to be treated for the purposes of the Corporation Tax Acts as if section 1030A(3) had never applied to it.</span></span></div>
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
<div class="LegP2ParaText LegAmend" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-left: 10%; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-indent: 1em;">
<span style="font-family: Verdana, sans-serif;"><span class="LegAmendingText" style="letter-spacing: 0em;">(2)</span> <span class="LegAmendingText" style="letter-spacing: 0em;">This section applies where 2 years have passed since the making of the distribution and—</span></span></div>
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
<div class="LegClearFix LegP3Container" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-align: -webkit-auto; width: 748px;">
<span class="LegDS LegLHS LegP3NoAmend" style="display: block; float: left; letter-spacing: 0em; text-align: right; width: 127px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">(a)</span></span></span><span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">the company has not been dissolved during that time, or</span></span></span></div>
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
<div class="LegClearFix LegP3Container" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-align: -webkit-auto; width: 748px;">
<span class="LegDS LegLHS LegP3NoAmend" style="display: block; float: left; letter-spacing: 0em; text-align: right; width: 127px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">(b)</span></span></span><span class="LegDS LegRHS LegP3TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 605px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">the company has failed—</span></span></span></div>
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
<div class="LegClearFix LegP4Container" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-align: -webkit-auto; width: 748px;">
<span class="LegDS LegLHS LegP4NoAmend" style="display: block; float: left; letter-spacing: 0em; text-align: right; width: 172px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">(i)</span></span></span><span class="LegDS LegRHS LegP4TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 561px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">to secure, so far as is reasonably practicable, the </span></span></span></div>
</blockquote>
<blockquote class="tr_bq">
<div class="LegClearFix LegP4Container" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-align: -webkit-auto; width: 748px;">
<span class="LegDS LegRHS LegP4TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 561px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">payment of all sums due to the company, or</span></span></span></div>
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
<div class="LegClearFix LegP4Container" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-align: -webkit-auto; width: 748px;">
<span class="LegDS LegLHS LegP4NoAmend" style="display: block; float: left; letter-spacing: 0em; text-align: right; width: 172px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">(ii)</span></span></span><span class="LegDS LegRHS LegP4TextAmend" style="display: block; float: right; letter-spacing: 0em; text-align: justify; width: 561px;"><span class="LegAmendingText" style="letter-spacing: 0em;"><span style="font-family: Verdana, sans-serif;">to satisfy all of its debts and liabilities.</span></span></span></div>
<span style="font-family: Verdana, sans-serif;"><a class="LegAnchorID" href="http://draft.blogger.com/blogger.g?blogID=5738696637442028054" id="" style="background-color: white; color: #006699; line-height: 1.4em; text-align: -webkit-auto; text-decoration: none;"></a></span><br />
<div class="LegP2ParaText LegAmend" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0.5em; margin-left: 10%; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em; text-indent: 1em;">
<span style="font-family: Verdana, sans-serif;"><span class="LegAmendingText" style="letter-spacing: 0em;">(3)</span> <span class="LegAmendingText" style="letter-spacing: 0em;">In a case where this section applies, all such adjustments as are required in order to give effect to subsection (1) are to be made, whether by the making of assessments or otherwise.</span></span></div>
<div class="LegFootnotes" style="background-color: white; clear: both; line-height: 18px; margin-bottom: 0em; margin-left: 0em; margin-right: 0em; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 1em; text-align: -webkit-auto;">
<div class="LegClearFix LegFootnotesContainer" style="background-color: white; border-top-color: black; border-top-style: solid; border-top-width: 1px; letter-spacing: 0em; margin-bottom: 0em; margin-left: 0em; margin-right: 0em; margin-top: 1em; padding-bottom: 1em; padding-left: 0em; padding-right: 0em; padding-top: 1em;">
<div class="LegClearFix LegFootnote" id="f00019" style="background-color: white; clear: both; letter-spacing: 0em; margin-bottom: 0.5em; margin-left: 0em; margin-right: 0em; margin-top: 0em; padding-bottom: 0em; padding-left: 0em; padding-right: 0em; padding-top: 0em;">
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<a class="LegCitation" href="http://www.legislation.gov.uk/id/ukpga/2010/4" rel="cite" style="color: #2790c4; font-family: arial, helvetica, verdana, sans-serif; font-size: 0.8em; letter-spacing: 0em; line-height: 1.4em; text-decoration: none;" title="Go to item of legislation">2010 c. 4</a>T<span style="font-family: Verdana, sans-serif;">he above Statutory Instrument was approved by<span style="background-color: white; letter-spacing: 0em; line-height: 19px; text-align: -webkit-auto;"> </span><span style="background-color: white; letter-spacing: 0em; line-height: 19px; text-align: -webkit-auto;">the</span><span style="background-color: white; letter-spacing: 0em; line-height: 19px; text-align: -webkit-auto;"> </span><a href="http://www.publications.parliament.uk/pa/cm201012/cmgeneral/deleg1/120130/120130s01.htm" style="background-attachment: initial; background-clip: initial; background-color: transparent; background-image: initial; background-origin: initial; border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; letter-spacing: 0em; line-height: 19px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: -webkit-auto; text-decoration: none; vertical-align: baseline;">First Delegated Legislation Committee</a><span style="background-color: white; letter-spacing: 0em; line-height: 19px; text-align: -webkit-auto;"> </span><span style="background-color: white; letter-spacing: 0em; line-height: 19px; text-align: -webkit-auto;">on Monday 30 January which means that distributions which made on or after 1 March 2012 in anticipation of a dissolution and which exceed £25,000 will be subject to income tax and not capital gains tax.</span></span></div>
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<span style="font-family: Verdana, sans-serif;">The way to preserve capital gains tax treatment will then be to enter a formal liquidation which may be a rather expensive exercise.</span></div>
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<span style="font-family: Verdana, sans-serif;">FromIIIt is clear that there are a lot of people trying to beat the 1 March deadline and dissolve companies under the ESC C16 rules.</span></div>
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<span style="font-family: Verdana, sans-serif;">There is no limit, or cap, on the amount of the distribution that can be made under ESC C16 and be subject to CGT.</span></div>
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<b style="font-weight: bold;"><span style="font-family: Verdana, sans-serif;">Making the distribution before 1 March</span></b></div>
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<span style="background-color: white; font-family: Verdana, sans-serif; letter-spacing: 0em;">HMRC has stated that as long as you have written to HMRC and provided the required assurances and you make the distribution in February then the fact that you have not heard back from HMRC before doing so does not matter. You still come under ESC C16 and pay CGT.</span></div>
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<span style="font-family: Verdana, sans-serif;">‘[In relation to] applications made but not finalised before 1 March, [HMRC] can confirm that it would not take a point on the absence of a response by HMRC provided that all the conditions attaching to the current ESC are met. If the distribution is made in February, the distribution can be treated as capital receipts in the hands of the shareholders and the £25,000 ceiling does not apply.’</span></div>
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<span style="font-family: Verdana, sans-serif;">If all the company assets are not yet in cash then it should be possible to make a distribution in specie and come within ESC C16. If the affairs of the company are complicated then you may need to take appropriate legal advice to make sure that what you are proposing to do would be treated as a distribution, if challenged, and that you will have complied with all the assurances you need to give under ESC C16.</span></div>
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<span style="font-family: Verdana, sans-serif;">If you cannot make the full distribution before 1 March but need to make one distribution before that date and distribute the rest of the company assets afterwards then beware. The current view of HMRC is that for the purpose of determining whether the post 1 March distributions exceed the £25,000 limit, and are liable to income tax, you have to take into account any interim distributions made before that date.</span></div>
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<span style="font-family: Verdana, sans-serif;">We do not believe that the HMRC analysis is correct. Article 18 of the Statutory Instrument (SI) states the new rules will only have effect in relation to distributions made on or after 1 March. So it is not clear to us how you can take pre March distributions into account when determining whether you have breached the £25,000 cap on March and subsequent distributions. </span></div>
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<strong style="background-attachment: initial; background-clip: initial; background-color: transparent; background-image: initial; background-origin: initial; border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-weight: bold; letter-spacing: 0em; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="font-family: Verdana, sans-serif;"> If you make a distribution under the new regime which of itself is less than £25,000 but which, together with earlier relevant distributions, exceeds £25,000 you will have to make up your mind as to whether to return that subsequent distributions as liable to capital gains or income tax.</span></strong></div>
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<b style="font-weight: bold;"><span style="font-family: Verdana, sans-serif;">A future tax return filing problem</span></b></div>
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<span style="font-family: Verdana, sans-serif;">The general aggregation principle could also present a bit of a problem when you are filing tax returns under the new regime. Suppose you make a distribution in March 2013 of less than £25,000 but the distribution together with a subsequent final distribution come in total to more than £25,000. This means that all the distributions are liable to income tax. If the second distribution is not made until after the tax return covering the first distribution is filed you will have filed on the basis that that first distribution was liable to CGT but it will subsequently become liable to income tax because of the second distribution.</span></div>
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<b style="font-weight: bold;"><span style="font-family: Verdana, sans-serif;">The new regime</span></b></div>
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<span style="font-family: Verdana, sans-serif;">The relevant statutory provisions governing the new regime which appear in the SI insert two new sections, 1030A and 1030B, into Corporation Tax Act 2010. One obvious danger in the new regime is that if the dissolution is delayed more than two years after the distribution or there is a similar delay in settling all the debts and liabilities then income tax will be applied to the distribution even though it was for an amount less than £25,000. Again you are going to have tax return filing problems.</span></div>
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<span style="font-family: Verdana, sans-serif;"><br /></span>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com0Sandbach, Cheshire East CW11 4QA, UK53.1335481 -2.373324953.1311666 -2.3782604000000003 53.1359296 -2.3683894tag:blogger.com,1999:blog-5738696637442028054.post-31044784832259815152011-12-01T11:33:00.001+00:002011-12-01T12:58:11.135+00:00Can you defer paying £3,000 tax?<b><span class="Apple-style-span" style="color: purple; font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif; font-size: large;"><br /></span></b><br />
<b><span class="Apple-style-span" style="color: purple; font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif; font-size: large;">Until recently personal tax bills of up to £2,000 Could be repaid through your PAYE tax code. Next year the figure rises to £3,000, Can you take advantage of it now?</span></b><br />
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<span class="Apple-style-span" style="color: blue; font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif; font-size: large; font-weight: bold;">PAYE Advantages </span><span class="Apple-style-span" style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">Those paying their taxes through the PAYE system, directors, employees and pensioners, can choose to spread their tax bill for one year over a later one. This is done by adjusting their PAYE code for the later year adjusted to recover what they owe. Finance Act 2011 increased the amount recoverable in this way to £3,000 from the next tax year but HMRC has now brought this forward.</span><br />
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<span class="Apple-style-span" style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"><b style="color: blue; font-size: x-large;">Not too late </b>The notes to the 2010/11 tax return correctly state that you cannot have any underpayment coded out if it is more than £2,000. However HMRC have recently announced they will extend this option for bills of up to £2,999.99. (See </span><a href="http://www.hmrc.gov.uk/payinghmrc/taxcode-vdp.htm#1">http://www.hmrc.gov.uk/payinghmrc/taxcode-vdp.htm#1</a> )<br />
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<span class="Apple-style-span" style="color: blue; font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif; font-size: large;"><b>TaxTip</b> </span><span class="Apple-style-span" style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">Even if you have already submitted your 2010/11 return showing tax payable by 31 January 2012, you can take advantage of HMRC's recent offer by telephoning them asking for your tax bill to be coded out.</span><br />
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<span class="Apple-style-span" style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"><b style="background-color: white; color: blue; font-size: x-large;">December Deadline </b><span style="background-color: white;">If you haven't completed your return yet, but suspect you owe HMRC money, <b>you need to get your return to them by 30 December</b> to take advantage of the coding option., After this date, the coding option is not available and any tax due must be paid by 31 January 2012,</span></span><br />
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<span class="Apple-style-span" style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"><span style="background-color: white;"><b style="color: blue; font-size: x-large;">No Tax Return </b>If you are not in the self assessment system but have received a tax calculation (Form P800) for 2010/11,you'll automatically benefit from the new limit. HMRC will simply include the amount due in your 2012/13 code. If this does not happen, contact HMRC immediately.</span></span><br />
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<span class="Apple-style-span" style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"><span style="background-color: white;"><span class="Apple-style-span" style="color: blue; font-size: large;"><b>Time-to-pay-deals</b></span> Bad news for those paying their tax under a time-to-pay deal. HMRC have said the new coding-out rule will not apply to them and they must stick to the schedule of payments already agreed.</span></span><br />
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<span class="Apple-style-span" style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"><span style="background-color: white;"><b style="color: red; font-size: x-large;">To Do </b>If you owe tax of less than £3,000 for 2010/11, phone HMRC by 30 December and ask them to reduce your 2012/13 code to take this into account. This will spread the bill over the next twelve months beginning in April 2012.</span></span><br />
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<span class="Apple-style-span" style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"><br /></span>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com0tag:blogger.com,1999:blog-5738696637442028054.post-2962135075931615922010-04-18T14:36:00.000+01:002010-04-18T14:36:11.462+01:00Employee Share Gains: Income Or Capital?<div style="padding-right: 5px;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span></div><div id="articlebody"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The Court of Session has recently provided the final word on a long-running tax dispute on whether personal rights and rights outside the articles of association can be taken into account when calculating the market value of shares for employees.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><b>Point at Issue</b></span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The significance of this is that if shares are acquired from employees for more than their market value (eg on a sale of a private equity company), then that excess amount is subject to income tax and National Insurance contributions (NICs) (which needs to be accounted for by the employer under PAYE) rather than the more favourable capital gains tax regime.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><b>The Facts</b></span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">In </span><em><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Grays Timber Products Ltd v HMRC</span></em><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">, ( the case is available <a href="http://www.bailii.org/scot/cases/ScotCS/2009/2009CSIH11.html">here</a> ) an employee acquired shares in a company. </span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">A shareholders' agreement signed more or less simultaneously by the majority of the shareholders gave him a right to receive a disproportionately large amount of any sale proceeds if certain targets were met and he remained in employment. This was in contrast to his entitlement under the articles, which would just have given him a pro rata amount based on the number of shares he held compared with the number of shares other shareholders held. </span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">A sale duly occurred and the employee received the larger amount of proceeds.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">HMRC subsequently challenged the tax treatment of his gain.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><b>Argument</b></span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The employee repeatedly argued throughout all proceedings that his rights in the shareholders' agreement should be treated as if they attached to the shares and were included in the articles, and so contributed to the shares' market value. </span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><b>Decision</b></span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">However, the Court of Session upheld the rulings of the lower courts in agreeing that market value meant the value of the shares and rights which passed to a prospective buyer. External rights (in shareholders' agreements, for example) or personal rights, which did not affect the buyer or the intrinsic value of the shares, could not affect the market value of the shares. </span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Accordingly, the shares' market value remained the pro rata amount the employee was entitled to under the articles (some £450,000) and not the enhanced amount (some £1.5 million).</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">This meant an income tax and NIC charge on the excess amount, which was payable under PAYE. </span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">In this case, the excess amount was over £1 million. Fortunately, however, the buyer of the company had operated a retention and so it was able to cover at least some of the amount sought by HMRC from that sum rather than having to go against the employee to recover its PAYE liability – which, as the sale occurred in late 2003, would now be difficult.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><b>Comment</b></span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">While not a surprising result, the case acts as a timely reminder, as capital gains tax schemes become more important, of the need for properly drafted arrangements to give employees additional rights on exit or achieving targets.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Crucially, these rights should be included in the articles rather than being expressed as personal rights. </span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The downside of this can be that the employee shares can have a slightly higher value on acquisition than their pro rata value, but this is hope value and so should not normally amount to any significant premium. </span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">In the </span><em><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Grays Timber</span></em><span class="Apple-style-span" style="font-family: Verdana, sans-serif;"> case, had the employee's full rights been included in the articles up-front, it is likely that, while he might have had to pay a little more to acquire his shares, his full £1.5 million would have been subject to capital gains tax after all and so he would have saved some £300,000 in tax.</span><br />
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</span>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com0tag:blogger.com,1999:blog-5738696637442028054.post-27370570891231018272010-04-11T10:46:00.002+01:002010-04-11T10:54:05.103+01:00UK: Charity Commission Re-defines Religion?<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
The Charity Commission's refusal in December 2009 to register The Gnostic Centre as a charity raises interesting issues about the Commission's criteria in defining religion and its apparent extension of existing legal boundaries. The decision can be read <a href="http://www.comisiwnelusennau.gov.uk/Library/about_us/gnosticdec.pdf">here.</a></span><br />
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The Commission considered that the Centre is not charitable as it:</span></div><ul><li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">does not advance education because it promotes a specific point of view and encourages people to adopt a particular viewpoint</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">does not promote the moral or spiritual welfare or improvement of the community since "there was no evidence of a clear and identifiable moral or ethical code or framework within Gnosticism" and so has no beneficial impact on the public</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">does not advance religion, as it does not have an identifiable, positive, beneficial moral or ethical framework and confines its benefits to too few people </span></li>
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</span></div><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">This decision brings religious charities back into the spotlight raising issues about the Commission's regulation of this sub-sector. </span></div><div id="articlebody"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span></div><div id="articlebody"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Although the Commission distances itself from matters of theology and doctrine where possible, it cannot avoid the issue where it is fundamental to registration. However, the extent to which it can, of its own volition, make judgements about theology and doctrine is likely to be controversial.</span><br />
<ul></ul><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Two issues are of particular concern:</span></div><ul><li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">1. <b>How the Commission decides what is and is not a religion.</b> In this case the Commission has taken several leaps from the position stated in a 1931 case to stating that a religious charity must encourage "common standards, practices or codes of conduct as stipulated in particular scriptures and teachings" alongside "an identifiable positive, beneficial, moral or ethical framework".</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">2. <b>The Commission's suggestion that it is only because of its "identifiable, positive, beneficial moral or ethical framework" that a religion impacts on society in a beneficial way.</b> Any other benefit would seem now to be relevant only once the moral or ethical framework requirement is met.</span></li>
</ul><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Not only do religious organisations seeking charitable registration now have to meet a more rigorous standard than those previously registered had to, but the Commission's general policy on religious charities seems to have shifted. This will be of concern to new and existing charities. It also raises concerns about the extent to which the Commission is making, rather than interpreting, law.</span></div></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br clear="all" /></span></div><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;"><br />
</div>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com0tag:blogger.com,1999:blog-5738696637442028054.post-74366062243148236402010-04-11T10:28:00.000+01:002010-04-11T10:28:38.388+01:00UK : Seconded and Casual Workers<b><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">United Kingdom: Secondment And Casual Workers </span></b><br />
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<b><span class="Apple-style-span" style="font-weight: normal;"><strong><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Secondment</span></strong></span></b><br />
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<b><span class="Apple-style-span" style="font-weight: normal;"><strong><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">This is an arrangement where the original (or seconding) employer "lends" their employee (the secondee) to another employer (the host). The host normally pays the original employer for the salary and other costs / expenses arising from the employment. The original employer may also charge a fee. </span></span></strong></span></b><br />
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<b><span class="Apple-style-span" style="font-weight: normal;"><strong><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The idea of a secondment is that the secondee will remain employed by the original employer for the duration of the secondment and will return to the original employer at the termination of the secondment. </span></span></strong></span></b><br />
<b><span class="Apple-style-span" style="font-weight: normal;"><strong><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
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<b><span class="Apple-style-span" style="font-weight: normal;"><strong><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">There can be benefits to all concerned in such arrangement – the original employer can (for a set period) reduce their salary costs and perhaps avoid / reduce redundancies. The secondee may gain valuable new experience and will preserve a number of benefits and entitlements e.g. continuity of employment with the original employer. The host can provide staff cover for e.g. short term projects / absenteeism. The arrangements can also build links between the original employer and the host.</span></span></strong></span></b><br />
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<div id="articlebody"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The original employer would (unless there was a clause in their contract allowing secondment – which would be unusual) require the employee to agree to a secondment before this could happen without it being a breach of contract.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">A written secondment agreement should be entered into so that all parities are clear what their rights and obligations are. </span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The following issues would normally be required to be addressed or considered (and often many more depending on the precise nature of the secondment).</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><b>Who is the employer?</b> </span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Despite the intention of the original employer and the host the employee may in fact end up being an employee of the host. If the employee becomes an integrated part of the hosts' workforce and managed directly by the host the employee is likely to become an employee of the host. </span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Therefore to seek to avoid this –</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span><br />
<ul><li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The secondee should not owe any duties directly to the host but only to the original employer.</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The host should not owe any duties to the secondee.</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The original employer should retain overall control of the secondee.</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The original employer should continue to deal with any matters that involve the secondee (e.g. appraisals, disciplinary & grievance matters etc).</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The secondee should not become integrated into the host's organisation.</span></li>
</ul><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Even if the host was not the employer it is likely that the employee would be deemed to be a worker of the host. That would entitle the worker to a number of rights from the host e.g. holiday pay.</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Discrimination: a worker may bring a range of unlawful discrimination claims against the host (age, sex, race, nationality, sexual orientation, religion and belief and disability).</span><br />
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</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">What are the employee's duties going to be? Are these the same as the work they undertook for the original employer or will it be something else?</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Management of the employee – how is this going to work? </span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">If the host employer takes on direct management of the secondee the host may become the employee's employer.</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The employees' terms and conditions of employment will continue through the secondment but should the host wish the employee to be bound by particular rules and procedure, confidentially etc these should form part of the secondment agreement.</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">How is disciplinary / grievance procedures going to work?</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">What happens if the secondee is absent?</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Who bears the costs relating to the liabilities to the secondee (e.g. health and safety) and acts of the secondee during employment? This together with appropriate indemnities should be recorded in the agreement. Is the appropriate insurance in place?</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Duty of care – both the original employer and the host are likely to owe the employee a duty of care.</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Vicarious liability – both the original employer and the host may be vicariously liable for the act of the secondee.</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">How is the agreement brought to an end? What notice does each party require to give the other?</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Return to original employer – an employee considering a secondment is likely to want to know from the outset what will happen:</span><br />
<ul><li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">If before the secondment is due to end, they serve notice to terminate their secondment and wish to return to their original employment.</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">If, before the secondment is due to end, either the original employer or the host terminates the secondment.</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">If, having served the full secondment anticipated by the parties, the secondment ends.</span></li>
</ul><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">If the secondee is to return to the original employer, a number of questions arise:</span><br />
<ul><li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Will they return to their original or another post?</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">What will happen if there is no post for them to return to?</span></li>
</ul><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Considering and providing for potential eventualities from the outset and setting these out in a clear secondment agreement (whatever form that may take) may avoid disputes once a secondment is commenced or completed.</span><br />
<h3><strong><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Casual Workers / Bank Staff</span></strong></h3><div><strong><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Casual Workers</span></strong></div><div><strong><span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span></strong></div><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The term "Casual Workers" has no special legal meaning. However, it is generally used to describe a group of individuals who are engaged across a wide range of industries in many different circumstances. Casual Workers are used in businesses where the need for workers is not constant, for example, where the workflow is variable / seasonal or where it is impossible to predict demand due to external factors.</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Casual Workers may be engaged in a number of ways:</span><br />
<ul><li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">On a zero hours contract, under which the company does not guarantee to provide work and only pays for work done.</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">As Bank Staff, where the employer can call on a pool of workers when work becomes available but there is no obligation on the worker to accept it (or for the company to offer it).</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Under an umbrella contract, where the worker is ostensibly engaged on a series of individual contracts but there is an over-arching contract (whether express or implied) that continues even when the worker is not working.</span></li>
</ul><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The term casual worker suggests an informal relationship between the parties, with little obligation on either side.</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">However, companies should not be lulled into a false sense of security, as in some cases, casual workers are employees with the full legal rights that this entails. To complicate matters the employment status of the casual worker can change over time, for example, if their working arrangements develop a regular pattern or they can establish that there is an umbrella contract of employment and so their employment continues during the periods when they are not working. </span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">There are a number of difficult issues in relation to casual workers that should be addressed when considering entering into such arrangement. These include:</span><br />
<ul><li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">How to calculate continuity of service (this has a considerable bearing on the workers rights including redundancy pay, notice, holiday pay entitlement etc).</span></li>
</ul><strong><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Status</span></strong><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">It is important to establish the casual worker's employment status from the beginning of the relationship because this will determine their legal rights and protections and the obligations the employer owes them. There are three broad types of employment status: an individual may be:</span><br />
<ul><li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">An employee.</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">A worker.</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Self employed.</span></li>
</ul><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">In any consideration of employment status, the main questions likely to be asked are:</span><br />
<ul><li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Is the individual required to provide their service personally?</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Is there an obligation on the company to provide work and an obligation on the individual to accept the work provided?</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Does the company exercise sufficient control over the way in which the individual carries out the work for the relationship to be properly regarded as an employment relationship?</span></li>
</ul><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Personal service, mutuality of obligation and sufficient control by the company is normally considered as the essential hallmarks of an employment relationship. Establishing whether there is mutuality of obligation is likely to be the key issue with causal workers. There will often be two key issues:</span><br />
<ul><li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Whether the workers are employees during the period when they are working.</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Whether the workers can link those periods together by establishing sufficient mutuality of obligation during the periods when they are not working.</span></li>
</ul><h3><strong><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Implications of status</span></strong></h3><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">I ndividuals who are employees enjoy the highest level of legal protection. For example employees:</span><br />
<ul><li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">May not be unfairly dismissed.</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Are entitled to a statutory redundancy payment.</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Are entitled to maternity and other family leave and pay rights.</span></li>
</ul><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Casual Workers who are not employees may be workers if they provide services personally under a contract and the other party to the contract is not a client or customer of a business carried on by the individual. Workers enjoy lesser protection but still have valuable statutory entitlements, for example:</span><br />
<ul><li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">To be paid the national minimum wage.</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">To a minimum period of paid annual leave and other rights under the Working Time Regulations.</span></li>
</ul><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The genuinely self employed, those who are in business on their own account and have no obligation to render personal service, have few employment rights, although they may be protected against discrimination.</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">During any period of work, a casual worker may be an employee, a worker or self- employed. The issue will also need to be considered as to the status of Casual Workers between engagements. Casual work often involves workers being engaged on a number of short term contracts with gaps in between. A lack of mutuality of obligation during these periods is likely to be fatal to any argument that the casual worker is an employee.</span><br />
<h3><strong><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Continuity of Employment</span></strong></h3><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">If a Casual Worker is able to establish they are an employee, they will be able to accrue continuous employment. This is important for many rights require an employee to have a qualifying period of employment (e.g. unfair dismissal, statutory redundancy payments etc). This can be straightforward when the engagement is continuous however what about when there are gaps? Whether a Casual Worker can establish that they have the relevant period of continuous service will depend on:</span><br />
<ul><li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Whether a global or umbrella contract of employment exists spanning both periods of work (and any absence).</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Whether any absences can be classed as a "temporary cessation of work" or whether an absence is by arrangement or custom regarded as continuing the employment of the employee.</span></li>
</ul><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Terms of engagement should be drawn up clearly setting out what the arrangements are and the status of the parties. This documentation will not be definitive and what actually happens in practice is taken into account in the assessment of the status of the worker.</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span><br />
<strong><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Tax treatment of casual workers</span></strong><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The employment status of workers will determine the tax treatment of any payments made to them. </span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Significant liabilities may follow for the company if they incorrectly take the view that the worker is not an employee and fails to deduct tax and national insurance through PAYE, so consideration at the outset of the relationship of any casual worker is required.</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Casual workers should not be confused with temporary agency workers who might also be used by an engager to achieve flexibility. In this posting casual / bank workers describes individuals who are engaged directly by the company and not through a third party agency.</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span><br />
<strong><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Conclusion<br />
</span> </strong><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">There are complex and wide ranging legal issues that arise from secondments and engaging Casual Workers. It is therefore important to have considered these issues in advance and have drawn up appropriate agreements and documentation at the outset clearly setting out what the arrangements are so as to avoid or at least reduce the scope for confusion and dispute later on.</span><br />
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</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
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</span>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com0tag:blogger.com,1999:blog-5738696637442028054.post-12568006315297539882010-04-11T10:05:00.000+01:002012-01-30T11:43:28.573+00:00UK: Extension Of Tax Reliefs To Certain European Charities<span class="Apple-style-span" style="font-family: Arial, Tahoma, Verdana, Helvetica; font-size: 13px;"></span><br />
<span class="Apple-style-span" style="font-family: Arial, Tahoma, Verdana, Helvetica; font-size: 13px;"><span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Until now charitable organisations registered outside the UK have been unable to claim the same charitable tax reliefs as those based in the UK.</span></span><br />
<span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span></span><br />
<span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Finance Act 2010 contains a new definition for organisations eligible for charitable tax reliefs which will include those based in the EU (including the UK), Norway or Iceland.</span></span><br />
<span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span></span><br />
<span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The proposed changes have been introduced to reflect the judgments of the European Court of Justice in </span></span><em><span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Centro di Musicologia Walter Stauffer v Finanzamt München für Körperschaften</span></span></em><span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;"> (European Court of Justice, C386/04 - available <a href="http://curia.europa.eu/jurisp/cgi-bin/form.pl?lang=en&newform=newform&alljur=alljur&jurcdj=jurcdj&jurtpi=jurtpi&jurtfp=jurtfp&alldocrec=alldocrec&docj=docj&docor=docor&docop=docop&docav=docav&docsom=docsom&docinf=docinf&alldocnorec=alldocnorec&docnoj=docnoj&docnoor=docnoor&radtypeord=on&typeord=ALL&docnodecision=docnodecision&allcommjo=allcommjo&affint=affint&affclose=affclose&numaff=C-386/04&ddatefs=&mdatefs=&ydatefs=&ddatefe=&mdatefe=&ydatefe=&nomusuel=&domaine=&mots=&resmax=100&Submit=Submit">here</a>), which was delivered on 14 September 2006 and </span></span><em><span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Hein Persche v Finanzamt Lüdenscheid</span></span></em><span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;"> (European Court of Justice, C318/07 - available <a href="http://curia.europa.eu/jurisp/cgi-bin/form.pl?lang=en&newform=newform&alljur=alljur&jurcdj=jurcdj&jurtpi=jurtpi&jurtfp=jurtfp&alldocrec=alldocrec&docj=docj&docor=docor&docop=docop&docav=docav&docsom=docsom&docinf=docinf&alldocnorec=alldocnorec&docnoj=docnoj&docnoor=docnoor&radtypeord=on&typeord=ALL&docnodecision=docnodecision&allcommjo=allcommjo&affint=affint&affclose=affclose&numaff=C-318/07&ddatefs=&mdatefs=&ydatefs=&ddatefe=&mdatefe=&ydatefe=&nomusuel=&domaine=&mots=&resmax=100&Submit=Submit">here</a> ), which was delivered on 27 January 2009.</span></span><br />
<span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span></span><br />
<span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Broadly, these cases held that it a breach of the EU Treaty for EU member states to distinguish for tax purposes between charities established under their own law, or within their own jurisdiction and those established under the law of, or within the jurisdiction of, another EU member state merely on the grounds that they were not indigenous. </span></span><br />
<span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span></span><br />
<span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The Stauffer case had applied this principle to the income and gains of non-indigenous charities, while the Hein Persche case extended it to the tax treatment of gifts made to such non-indigenous charities. </span></span><br />
</span><br />
<h3 style="font-weight: bold;">
<span class="Apple-style-span" style="font-family: Arial, Tahoma, Verdana, Helvetica; font-size: 13px;"><span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Organizations eligible for UK charitable relief</span></span></span></h3>
<span class="Apple-style-span" style="font-family: Arial, Tahoma, Verdana, Helvetica; font-size: 13px;"><span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Under the proposed changes, organizations eligible to enjoy the same tax reliefs as charities and Community Amateur Sports Clubs ('CASCs') in the UK, will be those which:</span></span><br />
<span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span></span><br />
<br />
<ul>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif; font-size: medium;">meet the England and Wales definition of a charity or CASC ;</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif; font-size: medium;">are located in a Member State of the EU, Norway or Iceland</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif; font-size: medium;">are regulated by a body in their home country which has an equivalent function to the Charity Commission or a similar regulator, as required by the law of the home country; </span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif; font-size: medium;">and is managed by 'fit and proper persons',</span></li>
</ul>
<br />
<span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span></span><br />
<span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">HMRC will decide if someone is a 'fit and proper person' for this purpose by considering, with reference to any records it has access to, whether that individual is likely to exploit the charitable reliefs for non-charitable purposes.</span></span><br />
<h3 style="font-weight: bold;">
<span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Charitable reliefs</span></span></h3>
<span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Organisations meeting the above definition will be eligible for all HMRC 'charitable reliefs', including reliefs on income tax, capital gains tax, corporation tax, inheritance tax, and various stamp taxes.</span></span><br />
<span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
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<span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">They will also be able to enjoy the same VAT reliefs and exemptions as UK charities and CASCs, as well as the benefits of the Gift Aid scheme.</span></span><br />
<span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span></span><br />
<span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">HMRC will be issuing guidance on its website about how organizations which meet the above requirements and wish to register for charitable relief should do so.</span></span><br />
<span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
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<span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The relief may be available retrospectively to 27 January 2009 (the date of the Hein Persche judgment) but this will be considered by HMRC on a case-by-case basis and details of the process are not yet available.</span></span><br />
<span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
The changes to do not apply to charities based outside the EU, Norway or Iceland.</span></span></span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><br />
</span>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com0Sandbach, Cheshire East CW11 4QA, UK53.1335482 -2.37332553.1311667 -2.3782605 53.1359297 -2.3683894999999997tag:blogger.com,1999:blog-5738696637442028054.post-21104329619552140032010-04-11T02:58:00.000+01:002010-04-11T02:58:45.687+01:00UK: Enterprise Management Incentive Schemes (EMIS)<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><b>What is the "EMI"?</b></span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The Enterprise Management Incentives Scheme (the "EMI") was introduced by Finance Act 2000. It aims to assist small high-risk trading companies to attract and retain key employees and reward those employees for taking the risk of working for such companies.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The EMI allows a qualifying company to grant options over shares with a value of up to £120,000 per employee (up to a maximum of £3million) on very flexible terms. </span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The EMI offers favourable tax treatment making it attractive to both companies and employees.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><b>What companies qualify?</b></span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Broadly, the EMI is aimed at companies satisfying conditions similar to those under the Enterprise Investment Scheme (EIS) and the Venture Capital Trusts (VCT) scheme.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The gross assets of the company (or the group of companies if a parent company) must not exceed £30million.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Gross assets broadly comprise all assets shown in the balance sheet when drawn up in accordance with standard accounting practice.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The company must have fewer than 250 employees.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The company must be independent and not under the control of any other<br />
company. Control for these purposes is defined as the ability of a person to secure that a company acts according to his wishes, whether through share ownership or provisions in the Articles of Association of that company. Shares in a subsidiary cannot be used in an EMI option.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Companies may be quoted or unquoted.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">There is no requirement that the company be resident or incorporated in the UK but the company's trading activities must be carried out wholly or mainly in the UK.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Group companies can offer the EMI to employees of both the parent and the subsidiary companies, provided that all of the subsidiaries in the group are qualifying subsidiaries. Broadly, this means that the parent (or another subsidiary) must own at least 75 per cent of the share capital and that no other person or entity should control (as defined above) that subsidiary.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Certain trades are excluded from the EMI. </span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Excluded trades include:</span><br />
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<ul><li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">leasing,</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">financial activities,</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">property development, </span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">shipbuilding, and </span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">steel and coal producing companies. </span></li>
</ul><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">For a group, the activities of all group companies are treated as a single business. Any excluded trade which is merely incidental to the trade carried on by the company or the group of companies will be disregarded.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><b>What employees qualify?</b></span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">To qualify, employees must:</span><br />
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<ul><li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">work for the company (or, if relevant, any group company) for at least 25 hours a week or for at least 75 per cent of their working time (which includes time spent in self-employed work);</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">not have a "material interest" in the company (or, if relevant, any group company) (defined very widely by reference to a holding of more than 30 per cent of that company).</span></li>
</ul><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Employees may hold options over shares under a savings-related share option scheme and under a Company Share Option Plan (CSOP) in addition to EMI options. However, CSOP options are taken into account in determining the limit of £120,000 per employee.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><b>Are there any restrictions on the grant of options?</b></span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Each employee can only hold a maximum of unexercised options worth<br />
£120,000 in any 3 year period under the EMI. </span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Any further options granted to an employee over and above this sum would not qualify for EMI relief. </span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The 3 year period will begin to run from the date of the grant of the last ption that took the total holding to £120,000.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Companies are free to set their own option period, but options must only be capable of exercise within 10 years of being granted and be exercised within that period. </span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">After 10 years have elapsed the tax benefits of EMI no longer apply to the exercise of any outstanding options.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Companies are also free to set the option price which may be more or less than the market value of the shares on the date the option is granted.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The shares over which options are granted must be fully paid up ordinary shares. It is not possible to grant an EMI option over redeemable or convertible shares.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><b>How is the EMI operated?</b></span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">A separate agreement will be required in respect of each option granted to an employee. This enables the company to tailor each grant of an option to the particular employee.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><b>Does HM Revenue & Customs (HMRC)supervise the operation of the EMI?</b></span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">There is no need for prior approval of the EMI from HMRC - the company must simply notify HMRC within 92 days of granting an option.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">A company can seek advance informal assurance from HMRC that it is a qualifying company.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">HMRC has a period of 12 months from the expiry of the 92 day notification period in which to check whether the grant is within the EMI rules. The company has a right of appeal against any HMRC decision that this is not the case.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">HMRC may require the company to provide it with information to enable it to carry out an investigation into the grant of options.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Any valuation of shares in connection with the EMI will need to be agreed with the Shares Valuation Division of HMRC. </span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Companies who grant EMI options need to make a return to HMRC within three months of the end of each tax year.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><b>What other requirements are there?</b></span><br />
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<ul><li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The employee must be prohibited under the terms of the grant of the option from transferring any of his rights under the option.</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">If the option is capable of being exercised after the employee's death, it must not be capable of being exercised more than one year after his death.</span></li>
</ul><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">There are provisions in the legislation for dealing with the EMI options if the company which granted them is the target of a successful take-over. In certain circumstances the holder of the option can agree with the acquiring company to surrender his option in return for a replacement option to acquire shares in the acquiring company.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><b>What are the tax advantages of EMI options?</b></span><br />
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<ul><li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">No income tax or national insurance contributions (NICs) are payable on the grant of an EMI option.</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Where the option price is equal or greater than the market value of shares on the date that the option is granted, then no income tax or NICs (including employer's NICs, currently at 12.8 per cent) are payable on the exercise of the option.</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Companies may set the option price at a discount (or even at nil).</span></li>
</ul><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"> However, where this is the case then, on exercise of the option, income tax will be payable on the discount (the excess of the market price of the shares on the date the option is granted over the exercise price paid by the employee). </span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Where the shares can be readily converted into cash when the option is exercised, any such income tax must be accounted for under PAYE and NICs (employer and employee) will also be payable on the taxable amounts.</span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">When shares obtained on exercise are eventually sold the employee will<br />
be liable for capital gains tax (CGT) but the shares will qualify as<br />
"business assets" for the purposes of entrepreneur relief. </span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">This means that an EMI compliant option exercised and shares sold two<br />
years from grant will give rise to no income tax charge and capital<br />
gains tax of only 10% on the gain to the employee. In addition the<br />
annual CGT exemption will be available.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">The costs of setting up and administering the EMI will be deductible expenses for the company when calculating its profits for the purposes of corporation tax.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;"><b>Can the tax advantages be lost?</b></span><br />
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</b></span><br />
<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">If at any time prior to the exercise of an option a "disqualifying event" occurs then, on a subsequent exercise of the option, an employee will be subject to income tax in the usual way as on the exercise of an unapproved share option.</span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">However, the gain will be calculated by reference to the market value of the shares on the date of the disqualifying event. </span><br />
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<span class="Apple-style-span" style="font-family: Verdana, sans-serif;">Examples of disqualifying events include:</span><br />
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<ul><li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">the employee ceasing to be a qualifying employee;</span></li>
<li><span class="Apple-style-span" style="font-family: Verdana, sans-serif;">the company ceasing to be a qualifying company.</span></li>
</ul><br />
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</span>Anonymoushttp://www.blogger.com/profile/04101711209261614785noreply@blogger.com1