Businesses have to cope with immense amounts of regulation and compliance – but tax is still the biggest and most onerous for most organisations. Partly this is because tax is complicated with tax legislation now running into thousands of pages; but it is also the constant change in the tax environment.
One of the key drivers of change is government’s incessant urges to be seen to be launching new initiatives. Another spur to fiscal innovation is the move to counter tax avoidance and each year, the statute book is filled with new rules to stop new schemes.
Planning in these circumstances is difficult, but arguably even more essential than ever. How you set up your business, extract your profits, finance your expansion and eventually sell out will be hugely affected by the tax issue, and it really pays to start the tax planning in partnership with us as early as possible in the process.
Making tax digital
Making Tax Digital, or MTD for short, is the HM Revenue and Customs (HMRC) project to get businesses to keep their tax records in a digital form for direct reporting to HMRC. HMRC has described it as the biggest change to the UK tax system since the introduction of self-assessment making it easier for individuals and businesses to keep on top of their tax obligations.
Starting and selling a business or company
Just because you have not yet even started your new business does not mean it's too early to be thinking about an eventual sale. Maybe you are aiming to develop a business idea, then quickly cash in before starting the whole process again - the typical serial entrepreneur. Or maybe you just see this as a smart career move with the successful sale of a self-started business looking very good on your resumé. And even if in for the long haul, good planning at an early stage will ensure that you don't pay more tax than necessary when it comes to selling.
Tax allowances for business investment
Fringe benefits are often used to provide employees and company owner directors with tax efficient ways of receiving remuneration. The rules taxing fringe benefits have changed over the years and as a result, some perks that were tax efficient in the past are no longer attractive, while others have become worth considering.
Working through personal service companies
The personal service company tax avoidance rules prevent you from saving income tax and national insurance contributions (NICs) by interposing a limited company between you and your ‘employer’ (or client). The rules (known as the ‘IR35 rules’ after the number of the press release in which they were first announced) were introduced in April 2000, and only come into play where you would be treated as an employee if you worked directly for the client under the same terms.
Accessing your company profits
When you draw profits from an owner-managed company most people are keen to ensure that they do it in a way that minimises the tax and national insurance contributions (NICs) cost. The tax rules are constantly changing. Just because you have drawn profits in one way in the past does not mean that this still continues to be the best approach. The changes to dividend taxation from April 2016 may affect your decisions.
Levels and bases of, and reliefs from, taxation are subject to change and their value depends on individual circumstances.
This publication is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking any action on the basis of the contents of this publication This publication represents our understanding of law and HM Revenue & Customs practice as at 31 January 2019.