Business Tax Insider Monthly Newsletter

There is scope for directors of owner-managed companies to maximise their remuneration package in a tax-efficient way by utilising benefits-in-kind (i.e., goods or services provided by the company either for free or at a reduced cost). Generally, the cost of providing a benefit is a tax-deductible expense for the company as a cost of employment, whilst the benefit can be either taxable or exempt for the director. 

Joe Brough looks at benefits-in-kind commonly provided to directors of owner-managed companies, and considers whether these are still beneficial, and outlines traps to avoid. 

As the 2023/24 tax year draws to a close, directors of personal and family companies should be reviewing the profits they have taken from their company so far in the tax year and considering whether it would be worthwhile to extract further profits before the end of the tax year on 5 April 2024. 

Sarah Bradford considers what might constitute an optimal profit extraction strategy for 2023/24. 

Contracts and agreements sometimes state one thing but mean another. When a taxpayer asks HM Revenue and Customs (HMRC) to treat an event or transaction as the parties intended, as opposed to in an unintentional way based on an inaccurately or imprecisely drafted contract or agreement, HMRC’s response is invariably that the tax treatment must follow the terms of the contract or agreement, even when the tax consequences are unexpected and more costly to the taxpayer. 

Mark McLaughlin highlights the importance of ensuring that business contracts and agreements are drafted carefully to avoid unexpected and expensive tax consequences. 

This table takes a bird’s eye view of the approach to taxing companies versus taxing limited liability partnerships (LLPs):  

Lee Sharpe compares and contrasts the treatment of limited companies and limited liability partnerships

Consider the following scenario:

'On a wintry sunny morning, Alan was reviewing his company’s January 2024 management accounts. Alan was the sole director and 100% shareholder of Llandudno Hotels Ltd, which operated two large hotels in Llandudno. The business was on course to healthy pre-tax profit of around £650,000 for the year ended 31 March 2024. Alan had been planning to pay himself a substantial ‘bonus’ before the year-end'. 

What does Alan do?

Peter Rayney examines an owner-manager’s cash extraction following the numerous tax and National Insurance contributions changes.

As the tax year draws to a close, it is prudent to review one’s 2023/24 tax allowances and consider whether there is scope for utilising any unused allowances so they are not lost. 

Sarah Bradford explores options for using 2023/24 tax allowances so they are not wasted.

Lee Sharpe looks at taxpayers’ record-keeping obligations in light of HMRC’s inexorable march to digital everything (almost).

Historically, HMRC has been quite relaxed about whether original records must be maintained or digital facsimiles (scans, etc.). 

HM Revenue and Customs (HMRC) recently commenced a ‘One to Many’ campaign, targeting taxpayers who incorporated property businesses in the tax year 2017/18 but reported no capital gains tax (CGT) liability in their tax returns on the basis that ‘incorporation relief’ applied in full. 

Mark McLaughlin highlights a potential trap for business owners seeking capital gains tax incorporation relief.

There is no ‘one size fits all’ as far as National Insurance contributions (NICs) are concerned. Different types of contributors pay different classes of NICs. Some classes secure entitlement to the state pension and contributory benefits; others are more akin to a tax. Some classes are earnings-related, whereas other classes of contribution are payable at a flat rate.  

Sarah Bradford outlines National Insurance contributions changes affecting the self-employed from April 2024. 

Many company owners wish to incentivise and retain key employees by offering share option schemes through the company, or simply by arranging for the company to issue shares to those employees.  

Mark McLaughlin outlines an arrangement allowing a company’s employees to benefit from the growth and success of the business without owning part of it. 

The cash basis for unincorporated trading entities was originally introduced by FA 2013 to apply from 2013/14 (FA 2013, Sch 4).  

Lee Sharpe considers how the cash basis has developed and why HMRC is so keen on the cash basis for landlords, the self-employed and partnerships.  

Making pension contributions is a tax-efficient way of saving for retirement. The planning and timing of pension contributions can also contribute to a tax-efficient remuneration strategy for owner-managed businesses.  

Joe Brough outlines the tax relief available when making pension contributions.