Tax Insider 3 x Newsletter Bundle 

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.

The right time to switch to an electric company car

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.

Form R185: What, when and how?

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.

VAT: The ‘dos’ and ‘don’ts’ of claiming back input tax

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.

Changing your accounting date before the new 'tax year' basis

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.

Inheritance tax problems with poorly drafted wills

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.

Q&As with Arthur Weller

Salary or dividends: Where are we now?

With the new tax year now in effect, most owner-managed businesses (OMBs) will have reviewed or will be in the process of reviewing their remuneration strategies.

Alan Pink takes a fresh look at the perennial question of profit extraction by company owners in the light of recent tax changes. 

Loans to ‘participators’: trips and traps

CTA 2010, s 455 is a key anti-avoidance weapon for owner-managed companies. Without it, owner-managers could easily sidestep a tax charge by arranging for their company to lend them funds (as opposed to paying a taxable bonus or dividend). However, CTA 2010, s 455 levies a (refundable) tax charge when a close company makes a loan to a participator (i.e., shareholder or loan creditor) or one of their associates (such as a spouse, parent, grandparent, child, grandchild, brother or sister). 

Peter Rayney provides a handy FAQ guide on trips and traps with loans to shareholders of closely-controlled companies.

Taxing times: Dividends in 2022/23

You may receive dividend income if you have invested in shares. You may also receive dividends if you have a family or owner-managed company and extract profits in the form of dividends. 

Sarah Bradford highlights the increase in the rates of dividend taxation applying for 2022/23 and considers what this means for investors and those extracting profits as dividends.

BADR - when a company’s activities might be non-trading

Many business owners are familiar with business asset disposal relief (BADR), which offers individuals a capital gains tax rate of 10% on net chargeable gains, up to a lifetime limit of £1 million.

Mark McLaughlin looks at business asset disposal relief for capital gains tax purposes, and when a company’s activities might be non-trading to a ‘substantial’ extent.

Q&As with Arthur Weller

Incorporating the property business: A bad idea?

Going back beyond the last few years, most landlords found little tax-based incentive to incorporate their property business; unless profits were very substantial, there was no or negligible tax saving to be made. That is not to say that there were not other good reasons for landlords to seriously consider incorporation. It’s just that, unlike traders, your average annual property income tax bill would likely not be one of them.

Lee Sharpe warns that putting a property portfolio into a company can be a bad idea for some, with the Spring Statement 2022 heralding leaner years ahead.

Jointly owned property - tax pitfalls to avoid

Andrew Carnegie once said, “The wise young [person] or wage earner of today invests his money in real estate”. He was also quoted as saying, “Ninety per cent of all millionaires become so through owning real estate”. Carnegie died in 1919, but what he said must be true, as property ownership remains one of the best investments a savvy investor can make. 

Meg Saksida outlines some pitfalls to avoid where investment property is jointly owned.

How landlords can secure tax relief for capital expenditure

Sarah Bradford explains how landlords can secure tax relief for capital expenditure when they prepare their accounts using the cash basis.

The cash basis is the default basis of accounts preparation for landlords with rental receipts (calculated on the cash basis) of £150,000 a year or less. 

No NICs on rental profits: True or false?

Individuals who are landlords are not normally liable to National Insurance contributions (NICs) on rental profits, unlike self-employed individuals carrying on a trade. 

Mark McLaughlin looks at the potential liability to National Insurance contributions for individual landlords on rental income profits.  

Q&As with Arthur Weller