Tax Insider

Directors can extract monies from a company in various ways, the choice invariably being between a salary or dividend (should the director also be a shareholder); but there may be circumstances that  might compel payment via a bonus.  

Jennifer Adams looks at situations where paying a bonus may be preferable to taking a dividend. 

There is a well-trodden alternative to a company purchase of own shares (PoS) where relations between shareholders have become strained and the company does not have sufficient cash or reserves for an immediate outright buyback. 

Ken Moody suggests an alternative to a company purchase of own shares in certain circumstances where relations between shareholders have become strained. 

One of the features of being a shareholder in a limited company, as opposed to being a sole trader or partner, is that you cannot just help yourself to company funds whenever you like. It’s no longer your money; it belongs to the company.  

Those funds need to be declared as dividends or salary, but another way to extract funds from the company is simply to borrow money via a directors’ loan account (DLA).  

Chris Thorpe looks at the potential issues in using a directors’ loan account

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In a previous article, I discussed some of the issues arising from changing accounting date to 5 April before the new ‘tax year’ basis of assessment comes in for 2024/25. Below, I expand on these matters with a practical case study. 

Kevin Read looks at some hazards to avoid for a sole trader changing accounting date in the tax year 2023/24. 

The liability of energy-saving materials (EMTs) and the definition of what actually counts as EMTs has changed a lot with a tightening of the definition of what exactly was eligible, following an ECJ decision in 2015 ((C161/14) European Commission v United Kingdom). 

Andrew Needham looks at the recent budget changes to the VAT treatment of energy-saving materials. 

Although currently, we have a two-tiered capital gains tax (CGT) rate level with 18% and 28% for residential property and 10% and 20% for all other assets, the percentage charge for CGT has historically been much higher. From the inception of the CGT regime up until the late 1980s, CGT rates were a substantial 30%. They were then increased to be in sync with the top rate of income tax at a whopping 40% for the next 20 years from 1988 up until 2008.  

Meg Saksida outlines two instances when individuals can get the lower capital gains tax rate on a disposal. 

The inheritance tax (IHT) allowance (or nil rate band) is available to every individual. In addition, the transferable nil rate band (TNRB) is a helpful facility for married couples and civil partnerships.  

Mark McLaughlin looks at an inheritance tax pitfall and planning point surrounding the inheritance tax transferable nil rate band. 

There are nearly five million family businesses in the UK paying nearly £150bn in tax, so they are the backbone of our economy. 

Chris Thorpe looks at how best to structure a husband and wife (or civil partner) business.

Many small and medium-sized companies struggled through the pandemic, with some directors or shareholders finding that they have overdrawn loan accounts which they are unable to repay, even after taking salary and dividends into account. 

Jennifer Adams considers the tax implications should a director be unable to repay the balance on their overdrawn directors loan account and the loan has to be written off.

Directors and employees who drive fully electric company cars will continue to benefit from a 2% benefit-in-kind rate in 2022/23 and 2024/25. When we consider that such vehicles were taxed at 16% of the list price in 2019/20, we can see the tax benefits of electric cars as fuel prices continue to soar, despite the Chancellor’s recent fuel duty cut.

Iain Rankin suggests that now may be the time to make the switch to an electric company car.

Beneficiaries or legatees from either a trust or a death estate may be paid income during the tax year by the trustees or the personal representatives (PRs). Unless directly mandated to the taxpayer, these amounts will generally have already been taxed on the trustees or PRs, such that the beneficiary will receive the income net of tax into their bank account. 

Meg Saksida explains when Form R185 might be received, and how it is used.

Businesses must overcome a number of hurdles in order to claim back input tax; it’s not just as simple as having a purchase invoice.

Andrew Needham looks at recovering input tax in practice and the evidence that may be needed other than the purchase invoice.

Most unincorporated businesses that do not have a 31 March or 5 April year end should be encouraged to change their accounting date before 2024/25, when the new ‘tax year’ basis for assessing profits will be in place. 

Kevin Read takes solace in classic soul music as he considers a change in accounting date prior to the introduction of the tax year basis of assessment.

Most people prefer to avoid thinking about their own demise. This is understandable but it can result in poorly drafted wills (or even worse, no wills at all), causing potential disputes about what has been inherited and by whom.

Mark McLaughlin warns that imprecise wording in wills can result in disputes and unexpected results, including for inheritance tax purposes.

A method by which cash can be extracted from a family company is to borrow from that company. The benefit for the borrower is a short-term loan, interest-free, with no completion of application forms and no refusal by a bank. 

Jennifer Adams looks at the anti-avoidance rules applicable to ‘participators’ borrowing from a family company.

I sometimes find myself scratching my head over the capital gains tax (CGT) relief for exchanges of interests in jointly held properties, which is not for the faint-hearted; patience and a careful analysis of the legislation are key. 

Ken Moody looks at the capital gains tax relief for exchanges of interests in jointly-held properties.

Although called the marriage allowance (MA), the benefit of the MA is available both for those couples that are married, and those in a civil partnership.

Meg Saksida points out the income tax benefit from being married (or in a civil partnership). 

If a business has a dispute with HMRC and it cannot be resolved through the internal review process or the alternative dispute resolution process, it has the right to appeal to the independent tribunal. In the first instance, the appeal is made to the First-tier Tribunal of the Tax Chamber

Andrew Needham looks at the time limits a taxpayer has to comply with when making a VAT appeal to the tax tribunal.

It is common for owner-managed business director shareholders to draw a low salary and high dividends when extracting funds from their company. However, what happens when most of those funds are paid into a ‘remuneration trust’ rather than being declared as a dividend? 

Kevin Read discusses a recent case on payments to a remuneration trust.

One of the more common benefits-in-kind is the provision of a company car. An income tax and Class 1A National Insurance contributions (NICs) charge arises when the employer provides a car which is available to the employee for their private use. The actual use of the car is irrelevant if the car is at the employee’s disposal; this is enough to trigger the liability. 

Chris Thorpe looks at some company car changes since 2020, and their tax effect.  

Death and taxes are said to be two certainties in life. However, in some (albeit unfortunate!) circumstances, an individual’s estate can escape inheritance tax (IHT) on death.  

Mark McLaughlin looks at circumstances where an individual’s estate can escape inheritance tax completely on death.