Taxation Services

Tax + Financial Planning for You, Your Business and Your Family

Ideas from Garbutt + Elliott and G+E Wealth Management 2017 - 2018

“The tax man’s taken all my dough/and left me in my

stately home/lazing on a sunny afternoon/and I can’t

sail my yacht/He’s taken everything I’ve got/All I’ve

got’s this sunny afternoon.”

The Kinks, Sunny Afternoon

Your BusinessPrivate fuel benefit – break even point for employees

Did you know that we can prepare detailed comparisons of

Company Car v Cash, including lease or purchase scenarios,

so you can take a reasoned decision over the relative costs

of rewarding employees? If you are also providing them with

a private fuel benefit, there is a point at which it costs them

more than it saves.

Where is that point? We can calculate that for you, or you

can use the formula below:

There is a simpler calculation for deciding whether or not

your business should reclaim VAT on private fuel costs and

pay VAT the fuel scale rate .

Personal tax paid on fuel benefit x 100 ÷ 4.54609

Price per litre

Miles per gallon

) ) Break evenpoint

))

=

Company Quarterly Instalments – Avoid Interest Charges

“Large” companies have to pay quarterly corporation tax

instalments starting on month 6 within their accounting

period if their taxable profits are £1.5m or more. However,

for any company in a group this threshold could actually be

much lower, as the £1.5m is divided by the number of active

companies in the group. A group of four trading companies

would have a threshold of only £375,000 per company - for

example.

Although there is one-year grace period, and instalments

only start in Year 2, reviewing the numbers well in advance

will save you potential interest charges to HMRC.

For any group, a Group Payment Arrangement could reduce

the administration of quarterly instalments and allow you to

retrospectively reallocate payments around the group and

reduce late payment interest charges.

Companies with taxable profits of £20m or more (again,

divided between group members) will be pleased to know

that HMRC have now delayed bringing forward the start

date of their quarterly payments to Month 3; this change

will not impact such companies until periods commencing on

or after 1 April 2019.

Well, let’s float just some examples about what you might be able to do about the tax man this coming year, for individuals, and for

businesses large and small.

If you are interested in any of the ideas here or the examples of our services,

visit www.garbutt-elliott.co.uk to find out more

or contact us at: hello@garbutt-elliott.co.uk

Planning should not be undertaken without bespoke advice on your own situation, and our Tax and Wealth Management teams can

work together on solutions to suit you.

Please contact us for details.

Short Life Assets – Speed Up Tax Relief

If your business’s qualifying capital expenditure doesn’t

fall wholly within the Annual Investment Allowance (now

permanently fixed at 100% on the first £200,000 spend

each year), consider a Short Life Asset election on the

other assets if:

You expect to sell or scrap it within 8 years of purchase

It depreciates faster than the rate of tax relief of 18% a

year, or 8% (depending on the type of asset)

The advantage of the election is, if you dispose of the

asset anytime within 8 years you will get all of the tax

relief going on it by that point - otherwise over 8 years you

will have relieved only around 80% of the asset (63% over

five years) with the balance still to come later.

Claim Extra Relief on Innovation

Research & Development Tax Relief provides an effective

relief rate of 46% on qualifying costs for SME’s.

Last year we turned a £343,000 tax relief claim for

a client into a £157,000 tax saving, rather than the

normal £68,000.

If you are loss making you can claim a repayable credit

back from HMRC worth 33% of spend.

In 2014/15 over 1,500 companies in the Yorkshire &

Humberside area made R&D claims of £70m

Save Tax on Remuneration – Spouses, Rent, Dividend… and other factors

Dividend tax changed in April 2016, which for owner

managed businesses increased the tax on dividends. You

could make use of £5,000 tax free by transferring shares

to your spouse and ensuring they make use of their own

tax-free dividend allowance of £5,000 per year. The

savings could be bigger than that if we review your overall

remuneration strategy for the family.

If you personally own the premises from which your

company trades, the company could pay you rent. It’s free

of national insurance after all, compared to salary. It has

become marginally more tax efficient than dividends too

since April 2016.

Does that mean you should pay rent rather than

dividends?

Not necessarily. By paying a rent you could start to lose

Entrepreneurs Relief on the property (the 10% rate of

Capital Gains Tax) when you sell it as part of your exit

from the business, so there is a trade off to consider.

Another factor is Inheritance Tax. If the property is

outside of the company, it may qualify for nil, or only half

the rate of IHT exemption for assets used in a trade. Inside

the company it could be completely exempt.

That’s a lot of “ifs” to consider – come and talk to us.

We’ll help sort out your overall tax planning on this.

Property Tax

Claim Relief on Commercial Buildings

You can claim tax relief against income on part of the

value of your building if it is used in your business or

let to third parties, whether you are an individual or a

company.

Here’s an example of one of our claims from 2016 that

we prepared with our specialist surveyor for a client on a

no win/no fee basis:

Building cost £6m -> tax relief identified and claimed

on £1.2m -> corporation tax saving £240k

The potential claim value depends on a number of

factors, but here’s a rough indication of the portion of

the building that could be claimed against tax

Know Your Stamp Duty Land Tax Relief on Purchases

We saved one of our clients around £50,000 last year by

knowing our SDLT elections, which was a deal breaker

for his decision to go ahead with a multiple residential

property purchase.

Change for Buy to Let Landlords

The economics of Buy to Let are changing from April

2017 for individual landlords using mortgages to fund

their business. Our model and advice will aid your

understanding of what the long term impact is on the

profitability of your portfolio, and what your options are

including the cost-benefit of incorporating your portfolio

in the short and long term.

Reclaiming VAT on Property – Landowners and Developers

Landowners - when selling your land to a housebuilder

VAT can potentially be recovered on costs incurred even

if you are not trading. The land may be part of a garden

or several fields. In some cases the costs may be incurred

several years before the sale takes place, for example,

professional fees involved in applying for and obtaining

planning permission.

The short answer is yes, VAT can be recovered, subject to

appropriate action being taken.

Developers - VAT incurred by you in the construction of

new properties is recoverable based on a housebuilders’

intended use of the property: when the newly built

property is sold or a long lease of over 21 years is

granted, it is classed as a zero-rated supply.

However, housebuilders subsequently choosing to

let their newly built properties instead are, for VAT

purposes, making an exempt supply, under which VAT

incurred in the construction, cannot be recovered and

consequently some of the VAT previously recovered

must be repaid to HMRC.

Good planning at the right time can help housebuilders

recover all the concerned VAT and keep it. A

housebuilder can make a zero-rated supply of the houses

to the newly setup company (Newco) in advance of any

lettings. It allows the housebuilder to recover VAT on

all the above mentioned construction costs, and this

planning is acceptable to HMRC.

Average Claims for Capital Allowances

Type % of Expenditure

Hotels 15 – 40

Care Homes 20 - 40

Offices 12 - 40

Retail 3 - 25

Industrial 5 - 25

Furnished Holiday Lets 10 - 25

Avoid Nasty ATED Trap

This comes under the avoid-shooting-yourself-in-the-foot

category.

Originally aimed at Russian oligarchs with vast London

residential properties held in companies, the changes to

the Annual Tax on Enveloped Dwellings thresholds mean

that many more ordinary companies could fall victim to

HMRC fines for failing to claim when they are exempt

from this tax on owning residential properties.

Two of the key exemptions from ATED are for example

if the residential property in the company is let, or is

being developed. Even so, if any one dwelling is valued

at £500,000 or more, your company still has to file a

“Nil Declaration Return” to HMRC within 30 days of the

start of the tax year to avoid a late filing penalty. Courts

have upheld HMRC’s fines as within the law despite

commenting on their disproportionality.

The £500,000 threshold is the value as at 1 April 2012

or date of acquisition if later and is the figure relevant

to the returns due by 30 April 2017. For returns due in

April 2018, the value will be that at 1 April 2017 or later

acquisition.

Separate returns may also be needed for in-year

acquisitions.

Clean Up Contaminated Land

Last year one of our clients spent £244,000 on clean up

costs of contaminated land that they had acquired. As a

company, Land Remediation Relief was available and was

worth an extra £24,000 tax saved to a developer.

However to our client who held the land as an investment

asset, the relief was worth even more turning it into an

extra £73,000 saving.

Avoid the Personal Tax Band Hidden Traps

Being aware of your tax rates and the hidden tax traps is key to considering what your income tax planning might be. Hidden

traps include when income exceeds the £50,000 or £100,000 levels.

Usually you need to take action within the tax year to control your income, with the exception of the Gift Aid carry back if

you are feeling generous to a charity rather than the tax man.

(Red)

(*)

Income Tax rates and bands - 2017 / 2018

Dividend tax rates

Tax rate depends on

number of children

(ATED - Annual Tax on Enveloped Dwellings)

Save your family from inheritance tax (IHT)

In addition to the usual suspects for IHT planning, you

should really consider:

Trusts - at least as much for asset protection down the

generations, let alone tax reasons. Trusts are particularly

effective for grandparents making a gift and subsequent

income tax planning across the family

Lifetime gifts, and where there is a seven-year IHT risk

then covered off with a tailored reducing balance life policy

from our IFA team

Main residence nil rate band from April 2017 – worth an

extra £140,000 IHT saved per couple

Converting wealth into assets that qualify for Business

Property Relief

An unused Nil Rate Band from the previous death of a

spouse

Other IHT planning options are available from our specialist

team. For example Regular Gifts Out of Income are

immediately outside of your estate even if you die within

seven years, and there is no threshold.

Small giftsNot exceeding £250 per year, per person to any number of individuals

Annual transfers £3,000 per donor per year

Some gifts in consideration (i.e. before, not after) of

marriage

per grandparent; £2,500 by either party to the other

Charitable gifts No limit

IHT Planning - The Usual Suspects for starters

Making the most of tax allowances:

Taking full advantage of your tax allowances remains an

integral part of prudent financial planning, as is being fully

aware of the potential tax-traps associated with pension

funding and accumulating pension wealth.

In April this year, we saw the introduction of the Lifetime

ISA, which for those under 40 offers a flexible investment

option with a 25% bonus. However, be aware that you

could potentially lose even more than the bonus if you

access your savings before 60, unless used for property

purchase by a first time buyer.

We have also seen the standard ISA allowance increase

to £20,000 per individual, which is welcome when we

consider the restrictions applied to pension tax relief for

those deemed by HMRC to be ‘high earners’ i.e. threshold

income above £110,000.

Further complications have arisen through the recent

introduction of the tapered annual allowance for pension

contributions and the slashing of the Lifetime Allowance –

you’ll invariably need help with these complex issues as it

is easy to make very expensive mistakes – we can help you

avoid this at G+E Wealth Management.

Many clients are asking us whether their investment

focus should be on ISAs or pensions, or a combination of

the two. The answer to this is really very much down to

individual circumstances. However, remember that only

pensions receive tax and national insurance (NI) relief,

so making contributions to pensions is significantly more

efficient than ISA contributions.

When income tax and maximum NI relief is taken into

consideration it is possible for some employees to receive

relief of over 45% for a basic rate tax-payer and over 55%

for a higher rate tax payer on pension contributions.

All this extra choice between the various products

designed for savers means that it is more important than

ever to fully understand your options and what would be

the best financial planning solution for you, based on your

future objectives, priorities and tax situation.

Let us help you through the maze of saving for your future,

negotiating the differing tax regimes of ISAs, LISAs, SSASs,

SIPPs, OEICS, VCT, EIS – the list is endless – making the

most of the tax reliefs available on your savings. Even in

todays heavily taxed world it is still possible to enlist the

government and HMRC to help you pay for your savings,

investments and retirement planning.

Investing for your future:

A key to a well-structured investment strategy is about

having the right investment diversification with the right

risk profile to suit your own tolerance to risk and volatility.

These fundamentals are more important than ever when

we consider the uncertainty that we face with Brexit, the

position with the UK parliament, the increasing threat

of inflation and the weakness of Sterling, together with

uncertainties over the wider global economy.

We are often asked by clients about how to best ‘time the

markets’ i.e. when to invest and when to disinvest to cash.

We would say that, the key to successful investment is

more about time in the (right) markets and keeping your

nerve when markets are falling.

According to the Barclays Equity Gilt study, an investor

holding shares for 10 consecutive years has had a 79%

chance of outperforming gilts over those 10 years.

Holding shares for 18 successive years has raised the odds

of beating gilts to 88%.

Of course, past performance is no guarantee of future

performance; the fact that shares have beaten bonds

over the long run is what we would expect in a properly

functioning economy.

At G+E Wealth Management, we work with you through

the peaks and troughs in the markets, giving valuable

advice on when and where to invest to make the most of

your hard earned income.

York:

Arabesque House,

Monks Cross Drive,

York YO32 9GW

Tel: +44 (0)1904 464100

Leeds:

33 Park Place,

Leeds,

LS1 2RY

Tel: +44 (0)113 2739 600

www.garbutt-elliott.co.uk

enquiry@garbutt-elliott.co.uk

@Garbutt_Elliott

Please contact us to discuss any of the featured topics and to

ensure all possible options have been explored.

Patent Box +

R&D

Inheritance Tax planning

Corporate Reconstructions MBOs

Auto Enrolment +

Pensions

Remuneration Planning

Capital Allowances Trusts

ISAs,

Bonds

Group Life Cover

Family Business Advice

Accounting Systems

Tax Returns

VAT Advice

Payroll +

Bookkeeping

Accounts +

Audit

Business Sale

+ Exit

HMRC Investigations

Corporate Finance

Non-resident +

Non-domicile

Make provision for loved ones

The recent changes in legislation have an impact on the

benefits available from pension and annuities on death.

This in turn will have an impact on how you structure your

provision for providing for dependents after they have

died.

This provision interacts with how income is derived from

your other assets to fund your retirement. Your other

investments and even your ISAs need to be taken into

account when you are looking to provide for your own

retirement and arranging your estate in an Inheritance

Tax efficient manner.

You need to take a ‘holistic’ view of your finances

where each asset interacts with every other asset – it

is not possible to compartmentalise each area. So your

pensions, investments assets and cash deposits need to be

considered when looking at how to protect your family – it

is not just a question of life assurance.

Whether you are a business owner, an employee or a

family member let G+E Wealth Management act as your

way-finder through the UK financial planning arena.

By getting you to ‘step back’ from the complexities of the

differing taxation regimes, G+E Wealth Management

can help you to take an overall view of where you are and

more importantly where you want to be.

Our Services