Current Tax Issues John Richards John Richards Managing Partner Anthony Andreasen Tax Consultant
Current Tax
Issues
John RichardsJohn RichardsManaging Partner
Anthony Andreasen Tax Consultant
Personal Allowance
2009/10
2010/11 >£100000
£6475
>£1129502010/11 >£100000
Abatement
£1 for £2
>£112950
NIL
Personal Tax Example
Personal Tax Example
Personal Tax2009/10 2010/11
Basic Rate
Higher Rate Threshold
Higher Rate
Dividend Higher (effective)
Rate
20%
>£37400
40%Rate
Secondary Threshold
Secondary Higher Rate
25% >£150000
50%Secondary Dividend
(effective) Rate36.1%
National Insurance
2009/10 2010/11
Class 1 & 4 Basic
Class 1 & 4 Higher
11%
1%
11%
1%
12%
2%
2011/12
Class 1 & 4 Higher
Class 1 Employer
Combined Higher
Rate tax & NI
1%
12.8%
1%
12.8%
2%
13.8%
41% 51% 51.5%
Other Tax Changes
•VAT goes back to 17.5% 1/1/2010
•Corporation Tax rate stays at 21% until 2011/12
•Capital Allowances – 40% FYA ceases 6/4/2010
•IHT threshold frozen £325,000
•Furnished holiday lettings beneficial treatment •Furnished holiday lettings beneficial treatment
ceases 5/4/2010
•Stamp Duty holiday on residential property below
£175,000 ceases 31/12/2009
Advancing Income into 2009/10
Earned Income
Earnings £120,000 pa
Move £20,000 to 2009/10 from 2010/11
Increase 2009/10 £8,000
Decrease 2010/11 £10,590
Saving £2,590Saving £2,590
Earnings £200,000pa
Move £50,000 to 2009/10 from 2010/11
Increase 2009/10 £20,000
Decrease 2010/11 £25,000
Saving £5,000
Advancing Income by changing year
end•Solicitor 30/4/2008 £120,000
30/4/2009 £150,000
30/4/2010 £180,000
31/4/2011 £150,000
Overlap relief brought forward £16,000Overlap relief brought forward £16,000
Change year end to 31 March 2010
2009/10 Tax Increase £61,090
2010/11 Tax Decrease £75,990
Saving £14,900
Alternative Suggestions
•Income splitting
•Loans to Shareholders
•Corporate partner/member
Offshore Disclosure Facility
•Notification of overseas bank accounts extended
until 4th January 2010
•Full disclosure by 12 March 2010
•Legislation to attack non disclosure
Tax Efficient Investments
•Enterprise Investment Scheme
•Venture Capital Trusts
•Film Partnerships
•Enterprise Zone Trusts
•Green Energy Investments•Green Energy Investments
Enterprise Management Incentives
•Tax efficient employee incentivisation
•Key employees
•Company must qualify
•Trade must qualify
•Employee must qualify•Employee must qualify
•Options (and shares) must qualify
•Company can obtain advances assurance that it
qualifies under the scheme rules from HMRC
Enterprise Management Incentives
Tax Implications
•Options granted for exercise price equal to or
greater than MV
•No tax on grant or exercise
•Tax + NI Charge
•Option price is less than MV at date of grant
•Shares under the option are free
•Disqualifying event
Enterprise Management Incentives
•Income tax on discounted options
•Corporation tax deduction
•Employers NIC
•Capital Gains Tax•Capital Gains Tax
Company Purchase of Own Shares
•Distributable Reserves
•Ordinarily treated as a distribution
•Capital Gains Treatment?
•Seek advance clearance•Seek advance clearance
•Significant benefit to shareholder (10% or
18%)
Criteria to be met
•Articles of association do not prohibit
•Substantial reduction in share capital
•Ownership period
•Must not be connected
•Bona fide commercial reason•Bona fide commercial reason
•Automatic treatment
Research & Development Tax Relief
“advance overall
knowledge/capability
in the field of science or in the field of science or
technology”
Research and Development Tax Relief
•Enhanced deduction of 175% on qualifying
expenditure (SME)
•Reduce taxable profits or increase allowable
loss
•Loss utilisation v tax credits•Loss utilisation v tax credits
•Large company relief (130%)
•IP changes from Pre Budget Report
Research and Development Tax Relief
•Eligible expenditure
•Staffing costs
•Consumables
•Software
•Utility costs
•Funding•Funding
•Subcontractor costs
•Making the claim
•Briefing document
•Late claims
•Maintaining records in support of R&D claim
Thank you for listening
John Richards
Managing Partner
Tel 0191 2569500
Anthony AndreasenAnthony Andreasen
Tax Consultant
Tel 0191 2569500