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Recording directors’ expenses correctly

2020-10-07T22:50:02+01:00October 9th, 2020|Categories: Limited Company|Tags: , , , , |

It is only permissible for a company to deduct expenditure in computing its taxable profits if incurred wholly and exclusively for the purposes of the trade. Since a company is a separate legal entity that stands apart from its directors and shareholders, it will not incur personal expenses. However, many companies, particularly 'close' companies (broadly a company under the control of 5 or fewer participants) pay for personal expenses of the directors. It is important to note that where payments, either made to or incurred on behalf of a director, do not form part of their remuneration package, these [...]

Profit extraction in 2020/21 – What is the optimal salary?

2020-04-01T20:00:49+01:00April 15th, 2020|Categories: Blog, Limited Company, PAYE|Tags: , , , , , |

A popular tax-efficient profit extraction strategy used by personal and family companies is to take a small salary and extract further profits as dividends. Where this approach is adopted, the starting point is to determine the optimal salary. While this will depend on personal circumstances and there is no excuse for not doing the sums, there are some general guidelines. Where the director does not have the requisite 35 qualifying years to provide access to the full single tier state pension paying a salary at least equal to the lower earnings limit for Class 1 National Insurance purposes (set [...]

Changes to off-payroll working rules delayed until 2021

2020-04-01T19:37:57+01:00April 8th, 2020|Categories: Blog, HMRC, Limited Company|Tags: , , , |

Amid concerns about their potential impact during the coronavirus pandemic, the government has announced a one year delay to changes to the off payroll working rules, due to take effect from April 2020. In an announcement at the end of the parliamentary debate on the Budget speech, Steve Barclay, chief secretary to the Treasury, said that the government is postponing the reforms to the off payroll working rules (known as the IR35 rules) from April 2020 to April 2021. Off-payroll working rules, known as IR35, were introduced in 2000 to ensure that someone working like an employee, but through their [...]

Reduction in the lifetime limit for entrepreneurs’ relief

2020-04-01T19:34:16+01:00April 5th, 2020|Categories: Blog, Limited Company, Taxation|Tags: , , , |

At Budget 2020 the Chancellor of the Exchequer announced that the lifetime limit of entrepreneurs' relief (ER) would be reduced from £10 million to £1 million for ER qualifying disposals made on or after 11 March 2020. Rules will also apply the revised limit to certain arrangements and elections that seek to apply the earlier £10 million lifetime limit. These rules are: - forestalling arrangements involving uncompleted contracts; and - elections made under TGCA 1992, s 169Q in connection with a share reorganisation or exchange. There are no transitional rules for disposals that take place after 11 March 2020, including where: [...]

Homeworking flat rate allowances increased

2020-04-01T19:15:38+01:00April 2nd, 2020|Categories: Blog, Limited Company, Self Employment|Tags: , , , |

HMRC have announced that it will increase the maximum flat rate tax deduction available where employees incur additional household costs where they work at home under homeworking arrangements, from £4 per week to £6 per week. This will take effect from April 2020. Broadly, no tax liability arises where employers make payments to employees for reasonable additional household expenses, which the employee incurs in carrying out duties of the employment at home under 'homeworking arrangements'. 'Homeworking arrangements' are arrangements between the employee and the employer under which the employee regularly performs some or all of the duties of the employment [...]

Should I incorporate my business?

2020-05-15T19:37:27+01:00December 27th, 2019|Categories: Blog, Business, Limited Company, Self Employment|Tags: , , |

As things currently stand, the expected cut in the main rate of corporation tax to 17% from April 2020 is unlikely to happen, but current corporation tax rates remain pretty favourable. There are also other areas where company formation may help save tax. The costs and regulations involved with running a company are usually greater than trading as a sole trader or in partnership, and should not be overlooked. In addition, incorporation generally means an increase in administration, which some businesses may find burdensome. The starting point for dealing with companies and company directors is to remember that a limited company [...]

Dividend Allowance

2019-08-23T16:23:01+01:00July 31st, 2019|Categories: Blog, Limited Company, Personal Finance, Taxation|Tags: , , |

Many family-owned companies allocate dividends towards the end of their financial year and/or the tax year, which means that the impact of the reduction in the dividend allowance from £5,000 to £2,000 from 6 April 2018 is only now starting to come to light. Many other taxpayers may not become aware of the change until they complete their 2018/19 tax return, which in most cases, will be due for submission to HMRC by 31 January 2020. The amount of tax payable on a dividend will primarily depend on which tax band the first £2,000 falls in. The tax rates on dividend [...]

Family companies – optimal salary for 2019/20

2019-09-02T11:28:46+01:00June 25th, 2019|Categories: Articles & Guides, Blog, Limited Company, Taxation|Tags: , , , |

For personal and family companies it can be beneficial to extract some profits in the form of a salary. Where the individual does not have the 35 qualifying years necessary to qualify for the full single-tier state pension, paying a salary which is equal to or above the lower earnings limit for National Insurance purposes will ensure that the year is a qualifying year. New tax rates and allowances came into effect from 6 April 2019, applying for the 2019/20 tax year. These have an impact on the optimal salary calculation for family and personal companies. As in previous [...]

What Expenses Can I Claim Through a Limited company

2019-09-01T22:07:16+01:00August 18th, 2018|Categories: Blog, Limited Company|Tags: , , |

As the Director of your own limited company, you can claim expenses on costs you have incurred on certain business-related items and activities. Are you aware of the limited company expenses you may be able to claim? You can claim a variety of expenses through a limited company, however the types of expenses you can claim tax relief on must be directly related to your contractor business and are classed as tax-deductible. If you incur an expense that is tax-deductible, your limited company can receive a Corporation Tax saving on this expense. Corporation Tax, which is 19% for the tax [...]

Changes to company carry-forward of losses confirmed

2019-09-01T12:01:22+01:00March 22nd, 2017|Categories: Limited Company, Taxation|Tags: , , |

Initially announced at the time of the 2016 Budget and following a period of consultation, Finance Bill 2017 contains provisions to reform the tax treatment of certain types of carried-forward loss for corporation tax purposes with effect from 1 April 2017. Losses arising from 1 April 2017, when carried forward, will have increased flexibility and can be set against the total taxable profits of a company and its group members (referred to as the 'loss relaxation'). For all carried-forward losses, whenever they arose, companies will be able only to use the losses against up to 50% of profits (known [...]

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