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For companies that are looking to pay their key employees/directors in excess of £100,000 in discretionary bonuses and have cash available, then there are strategies that could result in significant savings.  We offer a remuneration review to identify the possible tax savings on some alternatives to bonuses and dividends.

Don't rely on a crystal ball when it comes to your tax planning

Extract taken from our 2010 Summer edition Tax newsletter – if you would like to subscribe please leave your details here.

If the business is breaking into new markets or establishing a new product then by structuring this new business separately from the main business, may save you thousands in tax on new profits.

We offer business health checks to review the current business structure and identify the possible annual tax savings by restructuring the business.  Please contact us if you are interested in finding out more.

Are you sure that you are operating within the best structure for your business? If not, get advice!

Extract taken from our 2010 Summer edition Tax newsletter – if you would like to subscribe please leave your details here.

The Deputy Prime Minister said many thousands would face more intrusive tax investigations, with millions more facing cuts in benefits, such as winter fuel payments, child benefit and free bus passes.

Mr Clegg accused middle class earners who pay accountants to minimise their tax bills of behaving like ‘benefit cheats’.

He will say that legal tax avoidance and illegal evasion are ‘just as bad’ as falsely claiming benefits, adding:  ‘Both come down to stealing money from your neighbours.’

Tax evasion by the better off is to be aggressively pursued in a £900million drive which will see the number of people targeted for tax checks rise from 5,000 a year to 150,000.

Half of all the people paying the new 50p top rate of tax will have their tax affairs raked over by a dedicated team of investigators every year.  Lib Dem sources said the number of criminal prosecutions would increase significantly.  The tax crackdown will be undertaken by HM Revenue and Customs, the department which recently admitted getting the tax codes of millions of workers wrong.

This “muddying “ of the water between illegal evasion and legal avoidance is not good news for honest business owners and entrepreneurs who could find themselves facing even more aggressive tactics by the Revenue.

I urge any business owner to ensure that they talk regularly to their accountant about their affairs and ensure that they have taken Tax Fee Protection Insurance as the likelihood is more and more business owners will have their affairs investigated.    

Here at Balance we promote a wide range of advanced tax strategies to our clients and it has become clear since the General Election that the new government is not happy with them and will be looking to legislate against them wherever possible. The trouble is that there is currently a clear distinction between tax avoidance (legal) and tax evasion (illegal)—-Nick Cleggs speak tends to suggest that this distinction may not be so clear in their eyes in the future and the resources that the government is proposing to throw at this area means that there will be a significant upswing in the number of tax investigations.

It would be interesting to hear your comments on this subject.  Please keep expletives to a minimum.

You may not have access to online statements and information indefinitely.  Some businesses are only making a rolling six months of statements available.  If you don’t download a store copies of statements as you go then you may need to pay for copy statements at a later date.  It can therefore, save you money by getting into the habit of downloading statements and documents throughout the year, as well as storing them and backing them up.

Extract taken from our 2010 Summer edition Tax newsletter – if you would like to subscribe please leave your details here.

If any further clarification is required please contact us.

This post was created by Deb Bradley on behalf of the Balance Team.

Make sure you're not still using the old fuel rates

H M Revenue and Customs issued new advisory fuel rates for use from 1 June 2010.  Where employees are provided with a company car and they are reimbursed a mileage rate to cover the fuel used on business journeys, or employees are required to reimburse the employer for fuel used on private journeys then the advisory rates are normally used.  Records of the journeys and payments need to be maintained to ensure that tax bills don’t arise on the mileage reimbursed or fuel paid respectively.

These rates apply to all journeys on or after 1 June 2010 until further notice:

Engine Size                        Petrol     Diesel        LPG
1400cc or less                       12p           11p           8p
1401cc to 2000cc                  15p           11p         10p
Over 2000cc                          21p           16p         14p

Petrol hybrid cars are treated as petrol cars for this purpose.  The rates are not binding, and where actual costs can be demonstrated to be different these can be used instead by agreement with your local tax office.

Where mileage rates are paid for business journeys and adequate records are maintained, then it is possible for a VAT registered business to consider reclaiming VAT on the amounts paid.  The VAT that can be reclaimed can only be on the proportion of the mileage allowance that relates to fuel.  The employee will need to supply VAT petrol receipts in order to allow the business to reclaim the VAT.

Extract taken from our 2010 Summer edition Tax newsletter – if you would like to subscribe please leave your details here.

Owning and running a business can be incredibly stressful.  To help our clients, and other serious business owners, reduce the build up of stress we have commissioned a book called “Stress Proof Your Business and Your Life”.

You can find it on Amazon at £12.99 - but you are welcome to a copy with our compliments (*see below).

Now please don’t be put off by its title, since it is categorically not only for people who are stressed.  In fact, one of the key benefits from reading it is that you’ll get dozens of excellent ideas for putting a great deal of extra cash into your business and personal banks accounts.

Stress Proof Your Business and Your Life

There are four parts to the book:

Part 1.  Stress proofing the business stuff: looks at what people can do to reduce and prevent the stress caused by their business and financial situation.  And it provides a simple yet effective solutions to common challenges such as:

• Not making enough profit
• Running out of cash and other similar cash flow problems
• having too many things to do on your list
• Too much depending on you, and too many things that can only be done by you
• Not getting the right life-work balance
• Not having the information you need to make sensible decisions
• Losing too much of what you earn to the taxman
• Other people, especially customers and your employees, behaving unreasonably or unfairly

Part 2.  Stress proofing the money stuff:  looks at what people can do to reduce and prevent the stress caused by their personal financial situation.

In the first two parts much of the emphasis is on strengthening the financial business fundamentals – since they are often the primary sources of stress and anxiety for business leaders.  But strengthening them is also extremely worthwhile for people who aren’t suffering from stress.

part 3.  Stress proofing the personal stuff:  broadens the discussion by explaining how to reduce and prevent the stress caused by other things going on in people’s lives.

Finally Part 4.  Brings it all together into a practical action plan.

However, the Government is to publish a consultation document over the summer about plans to change the tax treatment of furnished holiday let property from April 2011. The consultation will look at issues that:

• ensure the Furnished Holiday Letting rules apply equally to properties wherever they are in the European Economic Area;
• increase the number of days that qualifying properties have to be available for, and actually let as commercial holiday letting; and
• change the way in which Furnished Holiday Letting loss relief is given.

We will know more about future changes as the consultation progresses.  In the meantime there are a few things to remember:

• Holiday accommodation in the European Economic Area that meets the conditions can be classed as a Furnished Holiday Letting, and perhaps save you tax.  The conditions include the property being actually let for at least 70 days a year, and not for more than a continuous period of 31 days to the same tenant.
• Losses arising from Furnished Holiday Lettings can be set against other income.
• Should the property be sold then it may be possible to
  a) rollover the gain into a further property or business asset, or
  b) reduce the gain by Entrepreneurs Relief

If you have any queries about your circumstances or the changes please do not hesitate to contact us.

Extract taken from our 2010 Summer edition Tax newsletter – if you would like to subscribe please leave your details here.

The main traps to be aware of are:

• Where the contract is not between the employer and the phone company
• Where the phone is a Personal Digital Assistant (PDA)
• Where more than one phone is provided

Contract
In order for there to be no personal tax issues for the employee, the contract for the provision of the mobile phone and airtime must be between the employing business and the phone company.  If not then there could be significant tax issues.

It is not always as simple as checking the bill.  Although the bill may show the employer’s name and address, the mobile phone contract may be a personal one between an individual and the phone company (personal contract).

If an employer then pays these bills, the amounts paid are treated as payments of net salary to the individuals on which National Insurance will become due.

The tax treatment will depend upon whether the employer pays the bill directly or reimburses the employee for the phone bill.  Either way the employee will suffer some tax on the amounts paid by the employer.

The only way to avoid this problem is ensure that the mobile phone contract is between the employer business and the phone company.

Digital Personal Assistant (PDA)

The phenomenal rate with which technology has advanced has resulted in significant changes to the size and functionality of mobile phones.  Unfortunately, the tax legislation has not changed with the technological advances.

The tax rules treat mobile phones and computers provided to employees differently.  If a mobile phone is provided then a tax benefit will not arise on the employee, irrespective of whether they make personal calls on the phone or not.

If a computer is provided for purely business purposes then no benefit will arise on the employee.  However if there is significant private use of the computer then a benefit in kind will arise on which the employee will pay tax.  There is no definition of what is significant use and this will be decided on a case by case basis.

Why should we worry about computers?  Well the legislation definition of a mobile phone is very tight.  For the phone to be treated as a mobile phone it must have been designed primarily for transmitting and receiving spoken messages.

Mobiles that play music, surf the net, receive emails and play games, such as a Blackberry or an iPhone, are considered by HMRC to be computers, rather than mobiles phones.

Why is this a problem?  If the mobile phone is classed as a computer then there is a chance of the employee being liable to tax on the phone, depending on the amount of private use.

More than one phone

If an employer provides two mobile phones to an employee, extra care is required.  If the phones provided are both classed as mobile phones, per above, then the employee would be liable to tax on the second phone, assuming that the first phone met all the conditions and the contracts are between the phone company and the employer business.

However, if both phones are treated as computers, then the employee may be liable to tax on the two “computers” depending upon the level of private use.  The interesting thing is that if one handset is classed as a mobile and the second as a computer then providing that any private use is on the mobile only, or any private use on the computer handset (PDA) is not significant then the employee would not be liable to tax on the handsets.

Providing that there is no tax bill for the employee then there will be no corresponding National Insurance liability for the employer business.

Extract taken from our 2010 Summer edition Tax newsletter – if you would like to subscribe please leave your details here.