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What is the Health Check?

As a business owner, you will invest a significant amount of time and money into ensuring the continued success of the business, which undoubtedly can leave little time for understanding the business’s tax position. UK tax laws are an everchanging maze, and it can be difficult to keep abreast of the changes affecting your business.

At PD Tax, we are committed to fully understanding your business, its tax needs to help you to ensure that you are fully tax compliant, and to assist you in identifying areas of risk which may have adverse effects on you/your business and tax planning going forward.

The Health Check will allow you and your business to put appropriate planning in place to tackle such risks, and provide peace of mind that the business is compliant, and operating tax efficiently. We aim to ensure that you are making full use of relevant reliefs and allowances, considering the historic tax position, and the future objectives of the business.

Choose from 3 service offerings as a part of the Health Check:

Bronze Review – from £1,500

Silver Review – from £2,500

Gold Review – from £5,000

Further details on what is included under each review may be found below.

To get started, please click the button below to complete our short questionnaire, and put yourself on the road to peace of mind. We will contact you within 2 working days to discuss your business/company in more detail, and will follow up with an in-depth synopsis of each review, and tailored fees for your business.

Areas Covered

  1. Review of remuneration package
  2. Business Expenses and Tax Free Benefits
  3. CIS (if applicable)
  4. Follow up meeting
  5. Call 6 months later

Areas Covered

  1. VAT compliance
    • claiming VAT on expenses
    • VAT records and returns
    • flat rate scheme/cash accounting scheme
    • capital goods scheme
  2. Review of remuneration package
  3. Business Expenses and Tax Free Benefits
  4. CIS (if applicable)
  5. Review of Capital Allowances
  6. PAYE Compliance Review
  7. Follow up meeting
  8. Meeting 6 months later

Areas Covered

  1. VAT compliance
    • claiming VAT on expenses
    • VAT records and returns
    • flat rate scheme/cash accounting scheme
    • capital goods scheme
  2. Review of remuneration package
  3. Business Expenses and Tax Free Benefits
  4. CIS (if applicable)
  5. Review of Capital Allowances
  6. PAYE Compliance Review
  7. Employee share schemes (EMI/CSOP)
  8. R&D Tax Credits (if applicable)
  9. Miscellaneous Items (eligibility for ER, BPR, review of SH agreements, business activities)
  10. Follow up meeting
  11. 2 further meetings at 6 and 12 months

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Entrepreneurs' Relief

Entrepreneurs’ Relief (often abbreviated to “ER”) is a valuable capital gains tax relief which may be available when you sell all or part of your business.

Provided that the relevant conditions are met, capital gains tax will be charged at a rate of 10% on the entirety of the gain.

As this is such a precious relief for entrepreneurs, PD Tax recommend that regular reviews are undertaken to ensure that you and your business meet the necessary requirements. We can advise you on whether you qualify for the relief, and if not, recommend steps you can take to ensure that you are eligible on a future sale.

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Investors' Relief

Investors’ Relief is available to investors on the sale of shares in unquoted trading companies purchased on/after 7 March 2016.

Provided that the relevant conditions are met, investors who realise capital gains on the sale of their shares will be liable to capital gains tax at a reduced rate of 10%, subject to a lifetime limit of £10 million per person.

This is therefore a valuable relief for investors and care should be taken to ensure that the you, the business, and the shares all meet the necessary requirements.

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Roll-Over Relief

When you sell a business asset and reinvest the proceeds in acquiring another business asset, Roll-Over Relief may be available to defer the payment of capital gains tax.

In order to be eligible for the relief, the asset must be used for the purposes of the business and qualifying assets include land and buildings, goodwill, and fixed plant and machinery.

If the proceeds are not fully reinvested in a new asset, then Roll-Over Relief will be restricted.

The rules differ for for non-depreciating assets (e.g. land/property) and depreciating assets (e.g. leases of 60 years or less, plant and machinery), therefore expert advice should be taken to ensure that the correct tax treatment is applied.

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Gift Hold-Over Relief

A gift is a disposal for capital gains tax purposes. Therefore, you may have tax to pay on the gift of an asset even if you did not receive any money for it.

In light of this, Gift Hold-Over Relief is available in certain situations to roll over the gain against the base cost of the gift, effectively transferring the gain to the person who received the gift.

It is important to note that not all gifts qualify for Gift Hold-Over Relief; only qualifying business assets and gifts into trust will be eligible for the relief.

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Incorporation Relief

On the incorporation of a sole trade or partnership to a company, the transfer of assets (e.g. land/property, goodwill) may give rise to a chargeable gain on which capital gains tax may be charged.

Where all the assets of the business are transferred to the company in exchange for shares, then Incorporation Relief may be available to reduce the capital gain to £nil.

The effect of the relief is to “roll-over” the gain on incorporation into the base cost of the shares, effectively deferring the gain until the shares are sold at a later date.

In some circumstances it may be beneficial for the taxpayer to sell the assets to the company in part for a loan and in part for shares, however this will in turn restrict Incorporation Relief available.

With this in mind, expert advice should be taken prior to incorporation to ensure that is structured in the most tax efficient manner.

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Principal Private Residence Relief

Principle Private Residence (“PPR”) relief is one of the more widely known tax reliefs, providing relief from capital gains tax on the sale of your home.

The level of PPR relief available is calculated by reference to the “period of ownership” and the “period of occupation” on a pro rata basis. With this in mind, where an individual has lived in their home as their main residence throughout their period of ownership, a liability to capital gains tax should not arise.

Complications arise where there are periods where the property was not occupied by the owner (e.g. because you left to work abroad or move in with a partner), or where you are residing in more than one property.

Therefore, where there is any doubt over whether PPR relief will be available in full, expert advice should be taken.

Lettings Relief

Where PPR relief is available on the sale of your home and you have let out the property to tenants, then additional relief may be available under Lettings Relief.

Up to 5 April 2020, Lettings Relief is available (up to a maximum of £40,000) where a property has been let as residential accommodation during a period of absence.

From 6 April 2020 onwards, Lettings Relief will be restricted to situations where the landlord is living in the same property as the tenant in shared occupation.

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Tax Director Service

Tax is complicated with opportunities and pitfalls to consider for your clients.

Our Tax Director Service gives you direct access to people who can help you to help your customers get the best possible results.

Call us to discuss your needs and we can work out a tailored tax director service for your firm so that you can:

•Bounce an idea
•Discuss a thorny matter
•Examine different options
•Go through technicalities
•Get peace of mind to pass on to your clients

EIS & SEIS

If you are a director of a company seeking to raise finance, or if you are interested in investing in shares, you should consider the valuable tax relief available under the Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS).

EIS and SEIS were introduced to encourage individuals to invest in smaller, high-risk companies. They offer generous income tax and capital gains tax benefits, namely:

Income Tax

  • EIS Shares – a reduction of income tax of up to 30% of the lower of the amount subscribed or £1mllion (i.e. maximum relief of £300,000.
  • SEIS Shares – a reduction of income tax of up to 50% of the lower of the amount subscribed and £100,000 (i.e. maximum relief of £50,000).

Capital Gains Tax

  • No capital gains tax on the sale of EIS & SEIS shares, provided that the investor owned the shares for at least 3 years prior to sale and income tax relief was claimed.
  • EIS reinvestment relief, which allows an individual to defer the capital gains on sales of other assets if they reinvest the proceeds in qualifying EIS shares.
  • SEIS reinvestment relief, which allows an individual to exempt a portion the capital gains on sales of other assets if they reinvest the proceeds in qualifying SEIS shares.

EIS & SEIS: What’s the difference?

EIS and SEIS are both aimed towards unquoted companies looking to seek investment to further their trade.

The conditions for qualifying for EIS and SEIS are broadly similar, however as SEIS focuses on high-risk early-stage companies, the rules are more restrictive.  A brief summary of some of the conditions that must be met include:

EIS SEIS
Must not be carrying on certain prohibited or excluded trades (e.g. legal and accountancy, farming, property development). Same as EIS
Must be an unquoted company Same as EIS
Must not be controlled by another company Same as EIS
The assets of the company must not exceed £15 million before the share issue, and £16 million after the issue The assets of the company must not exceed £200,000 before the share issue
Must have fewer than 250 full-time employees (or 500 for knowledge intensive companies) Must have fewer than 25 full-time employees
The funds raised from the share issue must be spent on a qualifying business activity within 2 years of issue/commencement. Same as EIS, except the deadline for spending the funds raised is extended to 3 years.

 

Share issue must take place within 7 years of the first commercial sale made by the company (10 for knowledge intensive companies) The business activity carried on by the company must not be more than 2 years old.
Shares must be ordinary shares which do not carry preferential rights Same as EIS

How can we help?

There are strict conditions that apply to the company, the shares, and the investor(s) that must be met in order for EIS/SEIS to apply. We have assisted our clients by performing a detailed review of the rules and advising on whether they could qualify under EIS/SEIS.

Businesses looking to utilise EIS/SEIS for their company must send certain forms and information to HMRC to allow HMRC to certify that the company shares qualify for tax relief. We can help prepare the appropriate documents to put forward the best case for why a company will be eligible.

HMRC also offers advance assurance so that directors and investors can be certain that the company’s shares will qualify for EIS/SEIS before they are issued. We can also prepare these advance assurance claims to provide further comfort for clients.

EIS and SEIS investments carry financial risk and should only be undertaken after speaking with a qualified financial advisor.

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Property Taxes

If you are a landlord letting out property in the UK, then it is important to consider your responsibilities with respect to reporting income and/or gains on your property and paying any tax due.

By taking pro-active advice, you may be able to reduce your tax bill – particularly where you are selling property or considering expanding your property portfolio.

If you receive rental income from a tenant, either from a UK or overseas property, then you may be subject to income tax on your profits.  You may also be required to submit a Self Assessment tax return and report your income and expenses to HMRC.

We have assisted many clients in identifying their allowable expenses and helping them reduce their tax bills.

If you have been receiving rental income and have not reported it to HMRC, then you may be able to make a disclosure under the Let Property Campaign.

We can help you make this disclose and make sure you only pay the right amount of tax whilst minimising interest and penalties payable.

SDLT applies on the purchase of interests in land in England and Northern Ireland (Scotland and Wales have their own Land and Buildings Transaction Tax and Land Transaction Tax respectively– not covered here).

With recent changes to SDLT and the introduction of the 3% surcharge, many taxpayers are finding it increasingly difficult to determine if and how much SDLT they may have to pay.

Expert tax advice can make sure you don’t face an unexpected and unwelcome tax bill or overpay tax unnecessarily.

As your property portfolio grows, you may wish to consider the benefits and drawbacks of incorporating your rental business into a company.

Taking into account the rental income received, your personal circumstances, and your future intentions for the business, we can help guide you through this process and ensure that your business is structured in the most tax efficient manner in a way that suits you.

If you are thinking of selling your rental property, you may benefit from tax advice prior to the sale to ensure that the sale goes ahead in the most tax efficient way and that all available allowances and deductions are claimed.

When considering your liability to capital gains tax, we will always consider the availability of tax reliefs such as Principal Private Residence Relief (PPR) and Lettings Relief to make the most out of your sale.

If you are selling commercial property, then VAT and capital allowance considerations should also be taken into account.

Stamp Duty Land Tax: Further Reading

Stamp duty land tax (SDLT) was introduced in 2003* and since then has been subject to extensive reform.

SDLT is charged on the purchase of interests in land and is payable by the purchaser. It is calculated based on the consideration paid, and includes not only money but also money’s worth (e.g. the assumption of a mortgage).

SDLT is currently charged on a ‘slice’ basis (like income tax). This means that SDLT is charged at increasing rates for the amount of consideration that falls into the different SDLT bands.

Different rates apply depending upon whether or not the property is residential or mixed/commercial and whether the individual buying the property is an individual or non-natural person (e.g. a company).

Higher SDLT Rates

Since 1 April 2016, all purchases of residential properties have been subject to an extra 3% on SDLT in each band where the purchaser is either:

  • a non-natural person (e.g. a company), or
  • an individual who already has a dwelling and isn’t replacing their main residence.

These new rates are subject to a number of special rules and transitional provisions. Extra care must be taken when considering whether the higher rates will apply as these rules can catch taxpayers by surprise leaving them with unexpected tax bills or having paid the higher rates when they aren’t applicable.

Since 2012, a special rate of 15% on the total consideration may apply to the purchase of residential properties by non-natural persons in certain circumstances. This special rate is separate to the recent 3% increase to each SDLT band.

The threshold for this special 15% rate was originally set at £2 million but from 2014 has been reduced to £500,000.

* From 1 April 2015 land in Scotland is subject to the Land and Buildings Transaction Tax. From 1 April 2018 land in Wales is subject to the Land transaction Tax. Neither of these taxes are covered here.

The Problem

A husband and wife owned a portfolio of 28 rental properties comprising both residential and commercial properties.

They were keen to transfer the properties into a newly incorporated company but were unsure of the capital gains tax (CGT) and stamp duty land tax (SDLT) implications of the arrangement or the availability of reliefs.

The Solution

We set out the tax implications of the proposed transfer and calculated the estimated tax due.

We considered the availability of SDLT reliefs, with a particular focus on the “partnership exemption”. As part of this advice, it was necessary to examine whether there was a partnership in place and whether the activities undertaken amounted to a “business”.

In terms of the couple’s CGT liability, we determined the most tax efficient way to allocate losses and the availability of incorporation relief.

The taxpayers’ compliance obligations were also considered, such as the time frames for making the relief claims and reporting the transfer on their tax returns.

The Result

The level of activities carried on by the taxpayers in respect of their properties was significant, therefore there was a strong claim that incorporation relief would be available. As a result, the gain was deferred and there was no immediate charge to CGT on the transfer.

In terms of the SDLT partnership exemption, whilst the level of activities carried on were likely sufficient to amount to a business, as partnership returns had not been submitted and there was no partnership agreement there was a risk that HMRC would challenge the position that the couple ran their property business as a partnership. With this in mind, we provided advice on how they may be able to strengthen their claim.

We also considered an alternative scenario where the taxpayers did not make a claim for the exemption. Whilst the 3% surcharge would apply on the acquisition of the properties by the company, multiple dwellings relief should be available in respect of the residential properties to reduce the overall SDLT liability.

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