Business Tax Insider Monthly Newsletter

It is common for an element of a director’s salary to be contingent on targets being met, which then results in them becoming entitled to be paid a bonus. Where a bonus is contingent on the profits made by the company, it may be some time after the year end until it can be determined whether it will be paid and, if so, how much.

Joe Brough outlines the conditions that must be met for a company to secure a corporation tax deduction for directors’ accrued bonuses and the associated PAYE implications.

There are currently numerous scenarios where it may be advantageous overall to operate a business outside of a company wrapper. This article considers the tax aspects of ending a trading or property rental company from the perspective of an owner-managed business (OMB) or ‘family’ company. I shall assume that there is a standalone company which is solvent, with the prospect of a healthy cash surplus after settling all remaining liabilities, and that the shareholder-directors will have relatively significant capital gains implicit in their share interests.

Lee Sharpe considers the main options when a company is ready for the chop – but is it always necessary?

Employers often provide staff with a Christmas party. When planning the event, it is important to ensure that the tax implications are considered alongside the venue, the entertainment and the food. .

Sarah Bradford highlights some tax traps to avoid when providing staff with a tax-free Christmas party.

Whilst death and taxes are said to be the only certainties in life, certainty is often conspicuously absent when seeking to establish the tax treatment of an event or transaction.

Mark McLaughlin looks at taxpayer clearance applications to HM Revenue and Customs and whether clearances given can be relied upon.

The ‘original’ IR35 rules have been in place for over two decades and have proved a troublesome area for both HMRC and taxpayers. The ever-growing body of case law – recently affecting many high-profile TV and radio presenters operating through personal service companies (PSCs) - shows just how damaging this legislation can be. 

Peter Rayney looks at the current issues involving contractors and similar workers.

Employees often need to incur expenses to do their work. The employer may meet the expense directly or the employee may incur the expense from the outset and reclaim the amount back from the employer. 

Sarah Bradford outlines the exemption for paid and reimbursed expenses, and highlights some traps to avoid.

Taxpayers will be familiar with the maxim that dividends tend to be more tax-efficient than salary, more recent developments in corporate and dividend taxation will, in some cases, mean that a bonus can feasibly be more tax-efficient overall. 

Lee Sharpe looks at the perennial question of how best to take reward from a family company. 

Business property relief (BPR) is valuable for inheritance tax (IHT) purposes. It broadly reduces transfers of certain types of business property by a specified percentage. For example, shares in an unquoted trading company can qualify for BPR at 100% if certain conditions are satisfied. One of the BPR conditions is a minimum period of ownership requirement. BPR is generally unavailable unless the relevant business property has been owned by the transferor for a minimum of two years. 

Mark McLaughlin points out that some ways of investing in the business are better for inheritance tax purposes than others. 

Jones v Garnett [2007] UKHL 35 was a landmark case, which was found in favour of the taxpayer. The case considered the settlements legislation and the tax implications and application of the spousal exemption found in the settlements provisions. The case is more commonly referred to as the ‘Arctic Systems’ case’.

Joe Brough reviews the ongoing implications of the Arctic Systems case and other matters to be aware of when gifting shares in the family company to a spouse.

Business property relief (BPR) is a valuable inheritance tax (IHT) relief, allowing certain types of business asset to be passed on IHT-free. There is also a 50% rate of relief for other eligible business assets that do not qualify for the 100% rate.

Sarah Bradford explains the conditions to be met for a business to qualify for 100% business property relief for inheritance tax purposes.

From a tax perspective, there is a tension between wanting to get tax relief for salary payments and having to account to HMRC for PAYE and National Insurance Contributions (NICs). It is quite possible to trigger a PAYE obligation before the director or employee has actually taken the benefit of any net payment. Strictly, NICs may be triggered separately from PAYE.

Lee Sharpe looks at the issue of when bonuses should be paid and payroll obligations accounted for, with an eye to the recent increase in corporation tax rates.

What constitutes ‘work’? There can sometimes be differences of opinion between employers and employees on this question! However, it may also cause disputes between taxpayers and HM Revenue and Customs (HMRC).

Mark McLaughlin looks at what qualifies as ‘work’ for certain tax-related purposes.