Keep Your House in Order!

Keep Your House in Order!

Keep Your House In Order In Light Of Current Tax Developments

In the constantly evolving tax landscape and with the regular commentary in the media on tax issues you may have questioned whether your business tax affairs are properly in order, making the most of legitimate tax breaks and maximising your current and successors’ wealth.

Clients of Richardson Swift will of course be aware that your taxes are in the forefront of our efforts to keep you and your business on track. Our dedicated tax professionals are well equipped to utilise legitimate tax concessions, reliefs and help you flexibly plan for the short, medium and long term.

The following are just some of the current “hot” topics.

Anti avoidance measures

Finance Acts 2012 and 2013 contained some of the lengthiest tax legislation to date and the current raft of anti avoidance measures and proposals by HMRC, including the recently introduced General Anti Abuse Rule (GAAR), could have far reaching impacts for some. In many ways though we are in unchartered territory and whilst some measures may be well intentioned and designed to stop the most blatant of tax avoidance and abuse of the tax system, some legislation that is being proposed might, in some people’s eyes, trap legitimate commercial transactions.

Commercial Property Transactions

One area in which greater care is needed is that of capital allowances relating to property acquisition, sale or transfer, and the new audit trail required to protect both buyer and seller. Greater advance co-operation is needed between yourself, your accountant and your solicitor to adequately protect your legal and tax position and satisfy new HMRC requirements in the transitional period April 2012 to April 2014, and rigorously from April 2014. We have worked successfully on a number of client cases with a firm of capital allowances specialists who are well versed in the transitional rules and all of the technical and practical issues that can arise, and so if you are considering a property transaction please contact us to arrange an initial free meeting on a no obligation basis.

Interactions of Real Time Information, the need for better business records and the taxation of directors’ loans

Many of the new tax initiatives have an interconnection. For instance, gone are the days of taking lump sums from the business to cover salary and dividend withdrawals with vague narratives in the books. The tighter audit trail enforced by RTI, together with HMRC’s powers to inspect business records in real time and the spotlight on the “recycling” of director loans all call for businesses to maintain a tidier, well documented record of business and shareholder transactions. Business records checks and enquiries come in many shapes including formal, informal, spoken or written. Increasingly they may be instigated by HMRC telephone questionnaire, or directly calling at taxpayers premises, and not just in response to historically filed returns. Please note at any time if approached by HMRC during your busy working day you are quite entitled to refer matters via your tax agent and request everything is done formally in writing.

IR35 and Personal Service Companies

Legislation has been enacted to extend the IR35 rules (“deemed employment” essentially, for personal services provided through an intermediary company) to office holders, and tighten up on avoidance through the use of personal service companies generally.

HMRC is said to be strengthening specialist compliance teams to deal with the two issues and it uses a risk based approach to check compliance. The use of HMRC toolkits and guidance tools can quite often be relied on as a first line of defence in compliance reviews. In the context of personal service company compliance checks, if a business has taken the “Business Entity Tests” and can show to HMRC’s satisfaction by means of evidence that they are either outside IR35 or in the “low risk” band, then any review will be closed and there will be no further check for 3 years provided the information given is accurate, and the circumstances, and particularly the working arrangements, do not change.

For this reason we encourage any business owners who think they may fall under personal service company legislation to take the business entity test, act accordingly if the outcome points to anything other than low risk and retain as evidence the test and supporting information. If you require assistance with the test or need us to review current contracts please do not hesitate to contact us.

Other News - HMRC launches two more amnesties

HMRC has recently launched the following amnesties inviting taxpayers to come clean or face stiff penalties:

  • buy-to-let landlords and holiday-home owners

  • Health and well-being professionals (other than doctors and dentists who were targeted separately in 2010)

If you are not currently a client why not call Derek Swift or Jon Miles to arrange a free, no obligation meeting.