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TAX PLANNING FOR BUSINESSES AND THEIR OWNERS
A Thorogood Special Brieﬁng
TAX PLANNING FOR BUSINESSES AND THEIR OWNERS
by fax on 020 7729 6110.uk ISBN: 978-185418402-3 Printed in Great Britain by Marston Digital . For more information contact Thorogood by telephone on 020 7749 4748.uk Freedom of Information Act in Practice: 2008 Susan Singleton © Peter Hughes 2009 All rights reserved. electronic.co. photocopying. hired out or otherwise circulated without the publisher’s prior consent in any form of binding or cover other than in which it is published and without a similar condition including this condition being imposed upon the subsequent purchaser. No part of this publication may be reproduced. or email us: firstname.lastname@example.org. associations and other organisations. International Commercial Agreements Rebecca Attree Technical Aspects of Business Leases Malcolm Dowden A CIP catalogue record for this Special Brieﬁng is available from the British Library. re-sold.uk w: www. recording or otherwise.Thorogood Publishing Ltd 10-12 Rivington Street Other Titles from Thorogood Publishing Email – Legal Issues: 2008 Susan Singleton London EC2A 3DU t: 020 7749 4748 f: 020 7729 6110 e: info@thorogoodpublishing. institutions. This Special Brieﬁng is sold subject to the condition that it shall not.thorogoodpublishing. Special discounts for bulk quantities of Thorogood books are available to corporations. stored in a retrieval system or transmitted in any form or by any means. without the prior permission of the publisher. Websites and the Law Susan Singleton Commercial Contracts – Drafting Techniques & Precedents Robert Ribeiro Commercial Litigation – Damages & Other Remedies Robert Ribeiro Corporate Governance David Martin Software Contract Agreements Robert Bond New TUPE Regulations Robert Mecrate Butcher No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the author or publisher.co. be lent. by way of trade or otherwise.
as always. to my parents for their unstinting love and support.Dedication To my wife Jenny and. .
...........7 Company cars ...................................2 Implications of the ‘Arctic Systems’ case....................................................................................................................................................................................................................9 Termination payments.............................................................................................................................................................12 Employee share schemes ...............................................................................................................................................................................................................24 Venture Capital Trusts ...............26 Community Investment Tax Relief .....44 Extension of basic rate band .39 4 INCOME TAX OF INDIVIDUALS 44 Allowances ...........................................................................................32 Property income.....................................................................................Contents The author ......................................................................................................................45 Overseas income..........................................................................................................................................................................................................................47 A THOROGOOD SPECIAL BRIEFING v .........................6 Beneﬁts in kind.......................ix 1 INCOME FROM COMPANIES 2 Dividends or salary?..7 Car fuel.......viii Foreword ..................................................................................................................................13 2 SAVINGS AND INVESTMENT SCHEMES 24 Enterprise Investment Scheme ...............................................29 3 SOLE TRADERS AND PARTNERSHIP 32 Loss Relief.27 Tax-exempt savings income......................................................................................................
..............................................................................................................................................................................................................66 Substantial shareholding relief ...............................................................................................................................75 Short-life assets......................110 vi A THOROGOOD SPECIAL BRIEFING .........TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S 5 CORPORATION TAX 56 Losses ......................................74 First-year allowances ..........106 Domicile ....................................................................................79 Disclaiming capital allowances ....................................................................................................................................................................................................................................99 Exempt transfers..................................................................................................................................................................................................................................................68 6 CAPITAL ALLOWANCES 72 Plant and machinery – general principles...............................................................101 Reliefs ...........................60 Purchase of a company’s own shares.....................................................................................................................................................67 Corporate Venturing Scheme...................................................................................................80 7 CAPITAL GAINS 82 Basic principles ......................................................................................................86 Principal private residences ..........................................................98 Taper relief...........................................................................94 8 INHERITANCE TAX 98 General principles .................................................88 Reliefs ...84 Transfers between spouses.............................................109 Interaction with Capital Gains Tax ..................72 Cars ...................................85 Capital losses..........................................................................................................................................................................................56 Groups .78 Industrial buildings allowances ........90 Chattels ...................................................................................82 Annual exemptions............................
...............................................................................131 Cash equivalent of company car...................................114 Accumulation and maintenance trusts.................................................................................................................................................................................................124 Special schemes .............................................................................................................................118 Business Property Relief and trusts.............................................................122 Land and buildings ....................................................133 Capital Gains Tax – annual exemption ..134 Inheritance Tax – nil rate band ................................................................................................................................133 Capital Gains Tax – taper relief ........................CONTENTS 9 TRUSTS 112 Interest in possession trusts .....................112 Discretionary trusts .....................................................................134 A THOROGOOD SPECIAL BRIEFING vii ..118 Comparison of trusts...................................................................................................................................131 Gift Aid – limit on beneﬁt received by donor ..130 Income Tax – rates and bands .......................116 Charitable trusts ....................................................132 Corporation Tax – rates and bands.......................................................................................................................................125 APPENDIX 130 Income Tax – personal and married couple’s allowances .......117 Overseas trusts..................................120 10 VALUE ADDED TAX 122 Registration .........
and he advises private clients in these matters. Company Law and Employment Law. based initially in Birkenhead and then.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S The author Peter Hughes is a Chartered Accountant.com. Details of the seminars can be found at www. He writes and presents seminars on taxation and other subjects including International Financial Reporting Standards. He has a wide experience of advising small and medium-sized businesses on the tax implications of their business decisions. Having qualiﬁed in a vibrant Liverpool City Centre practice. he worked for a time in property management before setting up his own consultancy in 2003. viii A THOROGOOD SPECIAL BRIEFING . in York. since 2008.uktrainingworldwide.
They do not pretend to be a comprehensive guide to all aspects of taxation – there are plenty of volumes which already serve that purpose – but they should set the manager or adviser on the right track towards reduction of the tax burden.000.Foreword This Report is aimed at owners and managers of businesses – businesses of all sizes but with particular emphasis on small and medium-sized entities. there have been some signiﬁcant changes to taxation. Capital allowances have been overhauled. interesting and informative. Further changes are planned for 2010/11 and 2011/12 which will adversely affect those with income above £100. Since the ﬁrst edition of the Report in 2006. which may be good for owners of investment property but not necessarily as good for business owners. Peter Hughes York May 2009 A THOROGOOD SPECIAL BRIEFING ix . It focuses both on the tax implications of business decisions and on opportunities for the reduction of the owners’ personal taxation. and in its place we have a ﬂat rate of 18% on all gains. The ten chapters will. The information given has been updated following the Budget of 22 April 2009 and of course assumes that the announcements on that date will pass into legislation in the form of Finance Acts. I hope. and married couples now beneﬁt from a transferable nil rate band for Inheritance Tax. The ten-year experiment with taper relief for Capital Gains Tax of individuals has come to an end. be readable. the starting rate of Income Tax for non-savings income has disappeared.
A Thorogood Special Brieﬁng Chapter 1 Income from companies Dividends or salary? Implications of the ‘Arctic Systems’ case Beneﬁts in kind Company cars Car fuel Termination payments Employee share schemes .
The bonus would become taxable in 2009/10 if it were not discussed at the board meeting and were instead determined on 1 May 2009. the date on which the bonus is recorded in the company’s books. the shareholders are usually the directors. In addition to a monthly salary. If the ﬁnancial year has already ended. Any of the above can be overridden by the company’s year-end if the amount of the director’s earnings for that year has been determined before the yearend. Should these sums be paid as an addition to their salaries – in other words. Timing may need to be considered: for a director. the date on which the director becomes entitled to the bonus. a bonus is taxed at the earliest of the following dates: • • • the payment date. EXAMPLE A bonus in respect of the year ended 31 December 2008 is decided at a board meeting on 15 December 2008 and is paid on 1 August 2009. When is it taxable? • • The date of assessment is 31 December 2008. the earnings are assessable on the date on which they are determined if this falls earlier than the three dates above. which falls in 2008/09. 2 A THOROGOOD SPECIAL BRIEFING . as a bonus – or would a dividend be more advantageous? Bonuses are straightforward in that they are taxed at the director’s marginal Income Tax rate and are subject to employee’s and employer’s National Insurance.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Chapter 1 Income from companies Dividends or salary? In an owner-managed company. they may wish to pay themselves periodic bonuses.
000. What are the relative tax advantages of paying the sum as a bonus or a dividend? The key to this calculation is to work out the gross payment which is needed in order to leave the director with a net receipt of £10. whose taxable income from other sources after the standard personal allowance of £6. of which 10% is deemed to have been paid already. liable for Income Tax of 32. The relative tax advantages of bonuses or dividends depend principally on whether the director falls into the higher rate band. the gross amount of the bonus would need to be £16.000 (after Income Tax at a marginal rate of 40% and National Insurance at a marginal rate of 1%) by way of bonus. The complex rules on timing which often lead a bonus to be taxed before it is received do not apply to dividends.949 (£10. In order to receive a net payment of £10. The effect is that tax is paid at 25% of the net dividend. no extra Income Tax is payable. which are simply assessable on the date of payment. being treated as the ‘top slice’ of an individual’s income. A higher rate taxpayer is. The director must therefore gross the dividend payment up by multiplying it by 100/90 and add the gross dividend to other income. the actual amount payable by the company.000. The dividend is deemed to have been paid net of Income Tax of 10%. A THOROGOOD SPECIAL BRIEFING 3 .000 by way of dividend.333 (£10.000 x 100/75). is to be paid an additional cash sum of £10.1 I N C O M E F R O M C O M PA N I E S Dividends are taxed on a wholly different basis.000 x 100/59). If the director is to be left with £10. assuming that the director pays Income Tax at the higher rate. There is no Corporation Tax deduction for dividend payments. they also depend on the Corporation Tax rate which applies to the company. EXAMPLE A director.000 and therefore pays Corporation Tax at 21%.000 after settling any tax arising therefrom.5% of the gross dividend. is £13. however. The company has taxable proﬁts (before payment of this sum) of £100.475 is £40. If the director still falls within the basic rate band. whereas a company paying a bonus will be able to reduce its taxable proﬁts accordingly. National Insurance is not payable on dividends.
040 4.160* 1% x £19.820 40.875 less earnings threshold £5.5% x £14.853 Dividend £ 4.600** 4.715 ** Taxable earned income plus personal allowance £6.198 195 4.300 Less tax deducted at source Tax liability – 15.814 7.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Bonus £ DIRECTOR Other taxable income Bonus Dividend (£13.815 13.475 less upper earnings limit 4 A THOROGOOD SPECIAL BRIEFING .400 40% x £19.482) 11.949 Dividend £ 40.335 (1.949 – 56.393 7.000 14.814 – 15.198 26 4.549/£2.480 1.000 16.224 * Upper earnings limit £43.549/£2.480 7.300 Bonus £ Employee’s NIC: 11% x £38.600 Dividend income 32.333 x 100/90) Taxable income Tax: Non-dividend income 20% x £37.814 54.
From 6 April 2006 the maximum annual contribution to a personal pension scheme is the higher of £3.853 4.000 – 100. the dividend would still be the better option.985 100. although the difference would be less marked. rising to £245. A THOROGOOD SPECIAL BRIEFING 5 .300 4.985 38.000 (16.000 in 2010/11 but then to be frozen for ﬁve years).949) Dividend £ 100.000 37.224 – 21.8% x £16.882 16.600 into a pension scheme. This may be a consideration if the bulk of a director’s earnings arise from dividends and there is an intention to pay more than £3.949 Proﬁt chargeable to Corporation Tax Corporation Tax at 21% Tax burden: Income Tax Employee’s NIC Employer’s NIC (additional) Corporation Tax 15. A ﬁnal point is that dividends are not ‘earnings’ for pension purposes.077 The dividend option results in a lower tax burden of £1.000 in 2008/09. If the company were paying Corporation Tax at the full rate of 28%.1 I N C O M E F R O M C O M PA N I E S Bonus £ COMPANY Proﬁt before bonus/dividend Bonus Employer’s NIC (additional): 12.847 (2. It is necessary to tailor such calculations to each particular situation.169 16.000 11. especially if the additional payment takes the director from the basic rate to the higher rate band or moves the company down from the full Corporation Tax rate to the marginal rate.600 and ‘earnings’ (subject to a maximum of £235.770.000 21.393 2.000 in 2009/10 and £255. and they will not always be straightforward.169) 80.
TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S
Implications of the ‘Arctic Systems’ case
It is common for directors to pay their spouses a salary and achieve an Income Tax saving, particularly if the director is a higher rate taxpayer and the spouse has no other income. This ensures that the spouse’s personal allowance and lower rate tax band are utilised. The spouse’s salary will be deductible for Corporation Tax purposes provided that it is reasonable in relation to the work actually performed. The facts in Jones v Garnett related not to a salary payment but to a dividend. Mr and Mrs Jones acquired Arctic Systems Ltd and each paid £1 for their shares. Mr Jones, a higher rate taxpayer, was the sole director. The bulk of the company’s proﬁts were paid out as a dividend, shared equally between Mr and Mrs Jones. A small salary was also paid to Mrs Jones, which reﬂected the work she did for the company as bookkeeper and company secretary. The Inland Revenue (as it was then known) challenged the share arrangement on the grounds of section 660A of the Income and Corporation Taxes Act 1988. The purpose of this legislation is to stop an individual settling his income on another individual who pays tax at a lower rate. This settlement legislation dates back to the 1920s when it was designed to prevent wealthy individuals from diverting income to family members. The High Court found in favour of Revenue & Customs in April 2005, resulting in an additional tax bill for Mr and Mrs Jones of £6,000. However, in December 2005 the Court of Appeal reversed the High Court’s decision. There was no gift of shares: Mrs Jones had subscribed to her share at the time the company was set up, dividends depended on the future trading fortunes of the company and there could be no certainty at that time that the company would be proﬁtable. The settlements legislation could apply, said the Court, only if there was an element of ‘bounty’ – a clear intention by one party to confer some beneﬁt on another. An appeal by Revenue & Customs to the House of Lords again found in favour of the taxpayer. The Lords held that there was a settlement between Mr and Mrs Jones but that this was exempt from the settlements legislation as an interspouse transfer. The Treasury then announced plans to change the law in order to catch couples involved in ‘income shifting’ as this is known, but these plans were shelved following the Pre-Budget Report of November 2008.
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1 I N C O M E F R O M C O M PA N I E S
Beneﬁts in kind
Employees and directors are most commonly remunerated in the form of monetary payments. Special rules exist for the valuation and taxation of beneﬁts in kind. The tax implications for both employer and employee may need to be considered in deciding whether to pay an employee in the form of cash or beneﬁts, particularly if the employee is a director. The most common beneﬁts are discussed here, with the emphasis on the overall tax burden for employer and employee. Except where stated, beneﬁts are taxable only on employees earning more than £8,500 per annum and on directors.
VAT on the purchase of cars is irrecoverable if there is to be any private use. In practice, even pool cars are usually deemed to be available for private use because an employee may take them home at night before a business trip the next day, or used for a diversion to a supermarket. The case Elm Milk Ltd 2005 established that, where a company minutes a resolution that a pool car is for business use and that it will be a breach of the employee’s contract of employment to use it privately, the VAT on purchase may be recoverable. An employer will be able to claim capital allowances on the car at 10% or 20% of the written down value (which includes any irrecoverable VAT). This is explained in more detail at Chapter 6. The employee will then be taxed on the cash equivalent of the car, which is its list price multiplied by the relevant percentage. The percentage is dependent on the car’s carbon dioxide emission (see Appendix) and this may therefore inﬂuence the choice of car. No employee’s National Insurance is due, though the employer must pay Class 1A National Insurance on the amount of the beneﬁt.
A company buys a car with CO2 emissions of below 160 for £15,000 for an employee paying higher rate tax. The relevant percentage is 25%, and the company pays Corporation Tax at the small companies rate (21%).
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A second company, which pays Corporation Tax at the full rate, buys a similar car for an employee paying basic rate tax. Would there be an overall tax advantage in the ﬁrst year in paying the employee the cost of the car in cash over four years? The beneﬁt is £3,750 (£15,000 x 25%).
Company 1 £ Car option Corporation Tax saving: Capital allowances £3,000 x 21%/28% Employer’s NIC: Beneﬁt £3,750 x 12.8% Less Corporation Tax saving: £480 x 21%/28% Employee’s Income Tax: Beneﬁt £3,750 x 40%/20% Tax burden Cash option Corporation Tax saving: £3,750 x 21%/28% Employer’s NIC: £3,750 x 12.8% Less Corporation Tax saving: £480 x 21%/28% Employee’s Income Tax: £3,750 x 40%/20% Employee’s NIC: £3,750 x 1%/11% Tax burden 38 1,129 1,500 (101) 480 (788) 1,500 1,249 (101) 480 (630)
Company 2 £
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If the fuel relates to an employee’s private car.1 I N C O M E F R O M C O M PA N I E S The overall tax burden for the ﬁrst company and its employee is lower by £120 as a result of giving the cash option. private fuel is provided with a company car. The principal tax planning issue here is for the employee to decide whether or not to take the beneﬁt in kind. while the employer receives a Corporation Tax deduction. A THOROGOOD SPECIAL BRIEFING 9 .900 since 6 April 2008) multiplied by the relevant percentage. Car fuel Fuel provided for an employee’s private use is taxable on the employee. for example the cash ﬂow implications of the purchase of the car now as opposed to paying the same amount over four years. which is the same as the percentage applied in arriving at the car beneﬁt. in which case the employer must account for output tax (known as the scale charge – see Appendix) because the employee has been supplied with fuel. More commonly. Alternatively. the beneﬁt is the cost of the fuel. although the latter course may be less attractive to the employee. Input VAT will have been incurred by the employer on the purchase of the fuel. Which method is more beneﬁcial will depend primarily on the amount of private mileage travelled by employees and also on engine-sizes. This can be recovered in full. The employer will be liable for Class 1A National Insurance on the fuel beneﬁt. but the second company would ﬁnd the car option more beneﬁcial by £203. the employer can ask the employee to keep detailed mileage records. Other factors would need to be considered. and only the business proportion of the input tax will be recovered. Unless all fuel is reimbursed to the employer by the employee. The same method must be used for all employees. This dispenses with the need to account for any output tax. the beneﬁt is a ﬁxed sum (£16.
are taxable on assets transferred to them. which has the effect of discouraging employers from providing private fuel.000). No input tax is reclaimed on private fuel.500 per annum. Assets used privately or transferred for cash An asset (other than a car or a van) made available to an employee for private use is taxed on an annual value of 20% of the market value when the asset was ﬁrst made available. The beneﬁt to a lower paid employee is the secondhand value of the asset.907 which would be avoided if the employee paid for fuel privately – though of course the employee would then expect to be paid a higher salary in compensation. including those paid less than £8. albeit less than that outlined above. the beneﬁt is 10 A THOROGOOD SPECIAL BRIEFING . To directors and to all other employees. This may change if the private mileage increases or the employee is a basic rate taxpayer.000 miles per annum and has the option of having all private fuel paid for by the company. £ Cost to employee if fuel paid by employer: Beneﬁt £16. which itself would carry additional tax.690 541 (114) There is an overall tax burden of £1.225 x 12.8% Corporation Tax saving on NIC £541 x 21% Corporation Tax saving on fuel 10. The employer pays Corporation Tax at the small companies rate.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S EXAMPLE A higher rate taxpayer drives 10. The relevant percentage is 25% and the estimated cost of fuel per mile is 10p.690) actually exceeds the cost of the fuel (£1.000 x 10p x 21% Extra tax paid by employer (210) 217 1.225 Income Tax £4. but in general the tax burden on private fuel is now quite punitive. It should be noted from the above example that the tax payable by the employee (£1. All employees.900 x 25% = £4.225 x 40% Class 1A NIC £4.
1 I N C O M E F R O M C O M PA N I E S the higher of the market value at the date of transfer and the market value when the asset was ﬁrst made available.500 – £500 Tax burden in 2008/09: Income Tax £500 x 40% Class 1A NIC £500 x 12.500.8% Corporation Tax saving on NIC £256 x 21% 800 256 (54) 1.8% Corporation Tax saving on NIC £64 x 21% Corporation Tax saving on capital allowances £2. the tax burden would be slightly greater as employee’s National Insurance would be payable. unlike for company cars. less any amounts already taxed.000. £ Beneﬁt in 2008/09 £2. Ownership of the asset is transferred to the employee in 2009/10 when its market value is £1. The employee is a higher rate taxpayer and the company pays Corporation Tax at the small companies rate.500.000 x 12. There is no taxable benefit if private use consists largely of commuting and any other private use is insigniﬁcant.500 x 100% x 21% (525) (274) Tax burden in 2009/10: Income Tax £2.500 as salary.000 x 40% Class 1A NIC £2. EXAMPLE An asset qualifying for the annual investment allowance is made available to an employee in 2008/09 immediately after it is purchased for £2. the employee is assessed on a beneﬁt of £500.002 If the employee were simply to buy the asset himself and draw an extra £2. Company vans made available for private use are taxed as an annual beneﬁt of £3. 500 2. If private fuel is provided.000 200 64 (13) A THOROGOOD SPECIAL BRIEFING 11 .500 x 20% Beneﬁt in 2009/10 £2.
namely the immediate full reclaim of input tax followed by the subsequent payment of output tax over the period in which the private use takes place. Statutory redundancy payments are calculated using the rules in the Employment Rights Act 1996. and a week’s pay for each year of service below age 41. but only if there is no contractual arrangement nor even an existing understanding that such a payment was to be made. subject to a maximum of 20 years’ service. provided it is genuine compensation and not payable under a service agreement or rights conferred by the company’s Articles of Association.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S There may also be VAT implications. It is recommended that PILONs are made following a genuine critical assessment and on an individual by individual basis. reﬂecting the likelihood of the employee ﬁnding alternative employment within the notice period. Employers who have an established practice of making PILONs may be construed to have an implied contractual arrangement – this is known as an ‘auto-PILON’. This is classed as a business gift. They are never taxable as earnings. While these are almost always deductible expenses for Corporation Tax purposes. A business which purchases assets and then makes them available for private use normally reclaims only the percentage of input tax on purchase which is attributable to the intended business use. Termination payments Payments may be made to an employee as compensation for loss of ofﬁce. This is known as the ‘Lennartz’ mechanism after the case Lennartz v Finanzamt München 1991. Payments in lieu of notice (PILONs) follow the same principle. they may be exempt from Income Tax. an employer may also pay an amount as compensation for loss of ofﬁce. which may be a consideration in deciding how much to pay.000 of any such payment is exempt from Income Tax and National Insurance. The ﬁrst £30. On transfer of the asset to the employee. there will also be a VAT implication. 12 A THOROGOOD SPECIAL BRIEFING . A second option may also be available. and output tax must be accounted for on the value of the gift unless this is below £50. In addition. which broadly give a week and a half’s pay for each year of service from age 41 upwards.
500 is chargeable to Income Tax. It is recommended that employers proposing a non-statutory redundancy scheme should write to Revenue & Customs in advance for clearance. The total of all four payments is £34. unapproved share schemes do not carry the same tax advantages as approved schemes.500.000. Unapproved share schemes Being free of conditions.500 and a non-statutory redundancy payment of £12. EXAMPLE An employee receives statutory redundancy of £5.000. Employee share schemes In addition to cash payments and beneﬁts in kind.000 is subject to Income Tax (though still not to National Insurance). however.000.000 applies to the overall total of compensation payments. Payments made under a non-statutory redundancy scheme are also exempt from Income Tax and National Insurance up to the limit of £30. always taxable as employment earnings.1 I N C O M E F R O M C O M PA N I E S ‘Garden leave’ is. PILONs and non-statutory redundancy payments and is reduced by any statutory redundancy payment. Any excess over £30. a PILON of £7. Revenue & Customs often view such payments as terminal bonuses. and therefore £4. which would bring them within the charge to tax. However. an employer may wish to reward an employee by means of shares in the company. This term describes a situation in which an employee remains bound by the contract of employment but remains at home having handed in the required notice. compensation for loss of ofﬁce of £10. The exemption limit of £30. A THOROGOOD SPECIAL BRIEFING 13 .000. The relative tax advantages of each scheme may be an issue in choosing such a scheme and deciding how many shares to grant.
On disposal of the shares. There are no tax implications at the date of grant of the option. • Participants may not hold a ‘material interest’ in the company if it is a ‘close company’.1% in 2008/09) is applied to this notional loan. A ‘material interest’ is 14 A THOROGOOD SPECIAL BRIEFING . Holdings of other approved or savings-related share option schemes are included. When the employee sells the shares to an unconnected third party. they will result in the acquisition of shares by the employee at a discount to market value. On exercise of the option. • The acquisition price must not be manifestly less than the market value at the date of grant.000. if any. and the result is taxed as a beneﬁt in kind – though it is ignored if all the beneﬁcial loans to the employee in the year do not exceed £5. Unapproved share option schemes An option scheme gives the employee the right to buy a speciﬁed number of shares at a speciﬁed price before an expiry date. Income Tax will be calculated as if the loan had been written off.000. there is a charge to Income Tax and National Insurance on the difference between the market value at the exercise date and the amount actually paid. measured at the time of grant of the option. The amount written off is taxed as a beneﬁt in kind.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Most commonly. A ‘close company’ is one which is controlled by ﬁve or fewer shareholders or by its directors. Approved company share option plans There are various conditions which must be met for an approved company share option plan (ACSOP): • No individual may hold options over shares with an aggregate market value of above £30. • Only employees and full-time directors (those working more than 25 hours per week for the company) may participate. the employee is subject to Capital Gains Tax on the difference between the sale proceeds and the original cost. The employee is then taxed as if there were an interest-free loan for the difference between the market value of the shares and the amount actually paid. The ofﬁcial rate of interest (6.
the shares are subject to Capital Gains Tax based on the sale proceeds less the acquisition cost. The participant must not have held a material interest at any time during the past twelve months. the directors own 52%. There is usually no Income Tax charge at the date of grant. Can either of them participate in an ACSOP? Oakham Ltd is a close company. If they are exercised between three and ten years after the date of grant. It is not controlled by ﬁve shareholders. plus any amount already charged to Income Tax on grant or exercise. and holdings of associates are taken into account. there is no Income Tax or National Insurance. (This may happen where a company ﬂoats. except where the market value is greater than the subscription price.) Share options exercised less than three or more than ten years after the date of grant attract an Income Tax charge and National Insurance in the same way as for unapproved share options. A THOROGOOD SPECIAL BRIEFING 15 . However. as the largest ﬁve between them hold only 49%. The acquisition price is the actual price paid for the shares. A and B are associated persons who together hold 28%. On sale. They are therefore not eligible for an ACSOP. EXAMPLE The shareholders of Oakham Ltd are: % A (director) B (director) C (director) D (director) E F (director) G (director) Others 15 13 10 6 5 4 4 43 A and B are husband and wife.1 I N C O M E F R O M C O M PA N I E S one of 25% in the company or in any company which controls it.
Likewise. the value is measured at the date of grant. There is no charge to Income Tax at the date of grant. – It must be a trading company. In both cases. • An employee with a material interest – deﬁned in this case as 30% of the share capital or (in the case of close companies) 30% of the assets – may not participate.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Enterprise management incentives The conditions which must be met for an Enterprise Management Incentive (EMI) are: • Participating employees must work 25 hours per week or spend 75% of their working time on company business. farming. – Its gross assets (and those of the group of which it is the parent) must not exceed £30 million. banking. If a ‘disqualifying event’ occurs and the option is not then exercised within 40 days. leasing. there must be no more than 250 employees (part-time employees count pro rata towards this total). • There are strict limitations on the type of company which is eligible: – It cannot be a subsidiary of another company and arrangements must be not in place to allow it to become a subsidiary in the future. for which ACSOPs are also taken into account. no arrangements must exist whereby control of any subsidiary will pass to another person. Numerous activities are excluded from the deﬁnition of ‘trading’. there is none on exercise unless the exercise price is below the market value at the date of grant. Income Tax is charged on the subsequent exercise on the difference 16 A THOROGOOD SPECIAL BRIEFING . • The options must be capable of exercise within ten years of the date of grant. – From 22 July 2008. • The maximum value of shares over which unexercised options are held is £3 million. whichever is the lower. insurance. legal and accountancy services and the management of hotels and nursing homes. most notably property. in which case Income Tax is charged on the difference between the amount paid and the market value at the date of grant or exercise. No one employee may hold unexercised options over shares with a total value of over £120.000. – If it owns any subsidiaries.
000. and exercise price is £1.50 less £6). there is no longer a Capital Gains Tax advantage to this scheme over other schemes. A THOROGOOD SPECIAL BRIEFING 17 . Additional Income Tax is chargeable because exercise took place more than 40 days after a disqualifying event.50 per share (£7. The company ceases to carry on a qualifying activity.50.000 limit. On 1 January 2009. Capital Gains Tax is charged on the disposal of the shares. the company is taken over by another company when the share price is £6. ACSOP options are granted which take the employee beyond the £120.000 shares in an EMI scheme. The most common ‘disqualifying events’ are: • • • • The company becomes a subsidiary of another company. The total taxable amount per share is £3. and Income Tax is therefore payable on £35. Since the abolition of the taper relief system from 6 April 2008.50. The acquisition cost is deemed to be the exercise price. The employee breaches the working time conditions. The employee exercises the option on 1 March 2009 when the share price is £7. Market value per share at the date of grant is £3.50.1 I N C O M E F R O M C O M PA N I E S between the market value on exercise and the market value immediately before the disqualifying event. Income Tax is chargeable because the market value at the date of grant is higher than the exercise price by £2 (£3. EXAMPLE On 1 January 2008 an employee is granted options over 10.50 less £1. This is in addition to any Income Tax charged because the exercise price is below the market value at the date of grant.50.50). This is charged on £1.
matching and dividend. The deduction is allowable against Income Tax. PARTNERSHIP SHARES These are paid for by way of a deduction from the employee’s salary. • If the company is a close company. The maximum deduction in a tax year is £1. partnership. In each case. and participation must be on the same terms for all. must not exceed £3.500 or 10% of an employee’s salary. there is a charge to Income Tax based on the lower of the market value on the date of grant or the date of withdrawal.000 in any tax year. which broadly must be no more than 18 months. There is no charge to Income Tax when the amount is deducted from salary. The shares are acquired at the lower of market value on the ﬁrst day of the period speciﬁed in the partnership share agreement (which can be no more than twelve months) and the acquisition date. There is no tax charge if the shares are withdrawn after more than ﬁve years. whichever is lower. The purpose is to give employees a continuing stake in the company. • A qualifying period of employment may be speciﬁed. If the shares are withdrawn within three years. there is a charge to Income Tax based on the market value of the shares on withdrawal. measured at the date of grant. FREE SHARES The market value of shares allotted to any employee. The shares are held in trust for between three and ﬁve years.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Share incentive plans The conditions for a share incentive plan (SIP) are as follows: • The scheme must be made available to all employees who meet the qualifying criteria and are UK resident. shares are held in a trust until they are withdrawn. Shares fall into one of four categories: free. 18 A THOROGOOD SPECIAL BRIEFING . If the shares are withdrawn between three and ﬁve years. the employee must not hold a material interest (deﬁned as for ACSOPs).
Income Tax is charged on £38. and if they are withdrawn between three and ﬁve years the Income Tax charge is based on the lower of the salary deductions and the market value at the date of withdrawal. A THOROGOOD SPECIAL BRIEFING 19 . Income Tax on withdrawal operates on similar principles to free shares in that there is no tax charge if the shares are held for ﬁve years. In all four cases. the employee is taxed in the year of withdrawal on the amount of the related dividend.000 and a deduction of £150 per month is made in respect of partnership shares. If they are withdrawn within three years. there is a charge to Income Tax based on the market value at the date of withdrawal. DIVIDEND SHARES A company may provide that dividends due on shares held in SIPs may be used to buy further shares if the participant wishes.1 I N C O M E F R O M C O M PA N I E S EXAMPLE Mr Ashley has an annual salary of £40. MATCHING SHARES These are offered in conjunction with partnership shares: the company provides free shares in proportion to the partnership shares.500 per participant per annum. Taxation is on the same basis as for free shares. when the shares are withdrawn from the plan they are deemed to have been disposed of and immediately re-acquired by the employee at market value. Dividend income reinvested is not treated as taxable income in the hands of the employee. The maximum is two matching shares to each partnership share.000 less twelve instalments of £150. Otherwise. being the salary of £40. subject to a maximum reinvestment of £1. Shares withdrawn more than three years after the date of reinvestment are not subject to Income Tax.200.
Part-time directors. There is a charge to Capital Gains Tax on sale of the shares. • Options cannot be exercised before the bonus date or more than six months afterwards. • • The company may impose a qualifying period of up to ﬁve years. and employees who have worked for part of the qualifying period. The acquisition price must not be manifestly less than 80% of the market value of the shares at the time of grant. The bonus date may be selected as three. • Shares must be acquired out of savings with a contractual savings (SAYE) scheme approved by Revenue & Customs.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Savings-related share option schemes The conditions for savings-related share option schemes (SRSOSs) are as follows: • The scheme must be available to all employees and full-time directors who have been employed throughout the qualifying period. No Income Tax is charged on grant or exercise. 20 A THOROGOOD SPECIAL BRIEFING . may be included. ﬁve or seven years after commencement of the scheme. • • Contributions must fall between £10 and £250 per month. This is based on the sale proceeds less the actual price paid. The following table summarises the essential points of the various approved share option schemes. Those with a material interest (deﬁned as for ACSOPs) in a close company may not participate.
5 or 7 years) Contributions £10 to £250 per month Option price > 80% of MV at grant date None CGT A THOROGOOD SPECIAL BRIEFING 21 .000 per annum Partnership shares up to £1.000 per employee (£3 million total) Income Tax if exercise price < MV at date of grant Disqualifying events may attract Income Tax CGT SIP All employees (subject to qualifying period) No material interest (25%) in close company Free shares up to £3.500 per annum Matching shares (maximum 2 for every partnership share) Dividend shares (maximum reinvestment £1. partnership and matching shares: no tax if withdrawn after > 5 years Dividend shares: no tax if withdrawn after > 3 years CGT SRSOS All employees (subject to qualifying period) No material interest (25%) in close company Shares acquired from SAYE scheme within 6 months after bonus date (3.000 per person Option price = MV at grant date No material interest (25%) in close company Tax on exercise None if exercised 3-10 years after grant Tax on sale CGT EMI Full-time employees No material interest (30%) Gross assets of company < £30 million Must be a trading company with no more than 250 employees Maximum £120.500 per annum) Free.1 I N C O M E F R O M C O M PA N I E S Scheme ACSOP Conditions Employees & full-time directors Maximum £30.
A Thorogood Special Brieﬁng Chapter 2 Savings and Investment Schemes Enterprise Investment Scheme Venture Capital Trusts Community Investment Tax Relief Tax-exempt savings income .
it will not qualify for EIS relief. if these activities comprise more than 20% of a company’s business. there is a requirement to use all of the money raised by the issue of EIS-qualifying shares within two years of the date of issue. 24 A THOROGOOD SPECIAL BRIEFING .TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Chapter 2 Savings and Investment Schemes The government has set up various schemes to encourage investors to subscribe for shares in certain ventures. If at least £500 is invested in new ordinary shares. but relief will be given on a maximum amount of £500. generous tax relief is available to encourage investors to back these companies. Shares listed on the Alternative Investment Market (AIM) are classed as unquoted. The company must be unquoted and must not be a subsidiary nor itself own any subsidiaries which do not carry on a qualifying trade. Three of these schemes are considered here. Ordinarily. the investor’s Income Tax liability is reduced by 20% of the investment. There are numerous non-qualifying activities which are broadly the same as for Enterprise Management Incentives (see Chapter 1). Enterprise Investment Scheme Investors with a portfolio in which they wish to include high-risk companies may ﬁnd Enterprise Investment Scheme (EIS) shares appropriate. These ﬁgures were £15 million and £16 million respectively before 6 April 2006. The tax reduction is restricted to the amount of Income Tax payable during the tax year. deﬁned as a business operating within the UK on a commercial basis with a view to proﬁt. Perhaps the most signiﬁcant qualifying criterion is the ‘relevant assets test’: the company’s gross assets before the share issue must not exceed £7 million nor must they exceed £8 million immediately after the share issue. There are strict limitations on the types of company which qualify for EIS relief. The company must be carrying on a qualifying trade. From 22 April 2009.000. it is estimated that the number of AIM shares eligible for the EIS have halved as a result of the change to the relevant assets test. such investments would be considered too risky for many investors. Under the EIS. There is no maximum investment.
000 x 20%) 30. Relief will normally be withdrawn if the shares are sold within three years of their purchase. any gain is not subject to Capital Gains Tax. the total investment can be carried back without restriction.000 Additionally. For 2009/10 onwards. which is useful if the potential relief exceeds the investor’s Income Tax liability for the year. A THOROGOOD SPECIAL BRIEFING 25 . £50. if the shares are sold at a loss. if held for a minimum of two years. the loss is allowable for Capital Gains Tax purposes. EXAMPLE Mr Leonard buys EIS shares for £30.000.2 S AV I N G S A N D I N V E S T M E N T S C H E M E S Relief can be carried back to the previous year. in which case all of the relief already given is withdrawn. or within three years of the commencement of the company’s trade if later. carryback was available only if the shares were issued before 5 October in the tax year and was restricted to the lowest of: • • • half of the amount subscribed for the share issue. although the loss is reduced by any EIS relief given.000 (6. the investment will almost certainly qualify for Business Property Relief (see Chapter 8) and. unless the disposal is not at arm’s length.000. If the shares are disposed of after this three-year period.000) £ 20. the unused balance in the previous year.000. What is the allowable loss? £ Proceeds Cost Less EIS relief given (£30. However. will be exempt from Inheritance Tax.000) Allowable loss (4. This is calculated as the lower of the relief already given and 20% of the disposal proceeds. holds them for four years and sells them for £20.000) (24. Previously.
shares in a VCT must be subscribed for and not purchased from a third party and must be new ordinary shares. Likewise. Income Tax relief having fallen from 40% to 30% in 2006/07. Tax relief is given at 30% of the investment (40% before 6 April 2006) but is restricted to the Income Tax liability for the year. an investor who sells VCT shares will not be liable to Capital Gains Tax provided that the company is still a VCT at the time of disposal. and the minimum holding period having increased from three to ﬁve years.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Venture Capital Trusts Venture Capital Trusts (VCTs) are quoted companies which invest funds in unquoted companies. Individuals who subscribe for new ordinary shares in a VCT may avail themselves of certain tax advantages.000. Like EIS shares. 26 A THOROGOOD SPECIAL BRIEFING . No more than £1 million can be invested in a single company. Dividends received by a private investor from a VCT do not give rise to an Income Tax liability. Broadly. provided that the investor has not subscribed more than the permitted annual maximum of £200. and at least 70% of those investments must be in unquoted companies which carry on a ‘qualifying trade’. Unlike for EIS investments. It is not possible to defer Capital Gains Tax on other gains by reinvesting the proceeds in a VCT. and consequently these gains can be distributed as tax-free dividends. and the shares must be acquired for bona ﬁde commercial reasons. and the VCT may not invest in companies with gross assets of £7 million before the share purchase or £8 million immediately afterwards (these limits were £15 million and £16 million respectively before 6 April 2006). The subscriber must be aged at least 18. even if the investor is a higher rate taxpayer. The company will be given Revenue & Customs approval to be a VCT only if it meets certain conditions. The maximum annual subscription is £200. though they are not as attractive as they used to be. Qualifying trades are the same as those deﬁned for the purposes of EIS shares (see above). these are that its income must arise mainly from investments. no single company can comprise more than 15% of the total investments. otherwise Income Tax relief will not be available. there is no carry-back available if the potential relief exceeds the Income Tax liability. From 22 April 2009 a VCT must use all of the money it receives for the relevant trade within two years.000. VCTs do not incur chargeable gains on the disposal of investments.
the average VCT lost 23% of investors’ money in the ﬁve years to December 2005. A loan may not be repayable within two years and thereafter can be repaid by a maximum of 25% per year. Consequently. investors who have purchased shares and are not the original shareholder are not eligible for Income Tax relief. they do not suffer Capital Gains Tax when they sell their VCT shares. This can be a double-edged sword. Another beneﬁciary is a charity which works to enhance A THOROGOOD SPECIAL BRIEFING 27 . or smaller organisations like credit unions. They may be household names such as high street banks. a Reinvestment Trust. can mean that shareholders will lose about 20% of their money – which eats a long way into the 30% relief. which helped it increase its turnover and staff numbers and broaden its range of products. VCTs do have certain disadvantages. although there have been some good performers. However. VCTs do at least offer a diversiﬁed portfolio. unlike most EIS shares. as any losses on VCT shares are not available for set-off against chargeable gains. Relief is withdrawn if the investor disposes of the shares within ﬁve years of the date of acquisition. CDFIs lend to and invest in deprived areas or underserved sectors which might otherwise struggle to gain access to funds. Among organisations which have beneﬁted from funds provided by CDFIs is a furniture manufacturer in the West Midlands which struggled to convince its bankers that its business plan was viable. The amount of relief withdrawn is calculated in the same way as for EIS shares. it approached its local CDFI.2 S AV I N G S A N D I N V E S T M E N T S C H E M E S As stated above. According to one source. The combined effect of the initial and annual charges. full repayment can be required no earlier than ﬁve years after the date of drawdown. together with the fact that shares are often illiquid and trade at a discount to net assets. Community Investment Tax Relief The Community Investment Tax Relief (CITR) scheme aims to help investors to attain a return on their investments in the knowledge that the funds invested will be put to good use. Shares may not carry any right of redemption within ﬁve years. The investment is made in an accredited Community Development Finance Institution (CDFI) and is in the form of a loan or a subscription for shares.
250 Relief is withdrawn retrospectively if the loan is repaid or the shares disposed of. 6 April 2013 and 6 April 2014.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S the quality of life of older people by using their reminiscences for exhibitions in museums.750 2. Tax relief is available as follows: Balance £ 2009/10 2010/11 2011/12 2012/13 2013/14 100. EXAMPLE An individual lends £100. Income Tax relief is given as a tax reducer at 5% of the amount invested and outstanding for each of the ﬁve years and cannot exceed the individual’s Income Tax liability for the year. 6 April 2012.000 25. Repayments are due at £25.000 Relief £ 5.000 on 6 April 2011.000 to a CDFI on 6 April 2009. 28 A THOROGOOD SPECIAL BRIEFING .500 1.000 3.000 75.000 5.000 50.000 100.
000 per annum (minimum £500) New ordinary shares Type of investment Loan or new ordinary shares 5% per annum for ﬁve years Five years (special rules for repayment of loans) Normal CGT rules apply Income Tax relief 20% (can be carried back one year) Three years 30% (no carry-back) Minimum holding period for Income Tax relief Capital Gains Tax relief Five years No CGT if shares held for three years No CGT Tax-exempt savings income Individual savings accounts The scope for tax savings on Individual Savings Accounts (ISAs) is relatively small – £61 a year for a higher rate taxpayer with £5. which can be invested totally in stocks and shares.000 per annum (no minimum) New ordinary shares CITR CITF which in turn ﬁnances deserving charities or businesses None Investment limit £500. Dividends are not subject to higher rate tax.2 S AV I N G S A N D I N V E S T M E N T S C H E M E S The following table compares the three schemes: EIS Type of company Qualifying trade VCT Investment company investing in qualifying trading companies £200.200.100 invested at 3% – yet the scheme is worth a mention. designated as such at the time of subscription. The total allowable annual investment s £7. Any interest earned is exempt from Income Tax.600 can be held as cash. not least because a cash ISA avoids the risk associated with EIS shares and VCTs. Investors can take out cash ISAs or stocks and shares ISAs for each tax year. although up to £3. though the 10% tax credit which they carried when ISAs were introduced has now been abolished. A THOROGOOD SPECIAL BRIEFING 29 .
The 2009 Budget announced an increase in the overall ISA limit to £10.200 for the tax year 2010/11.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S ISAs are often said to be less tax-efﬁcient than pension contributions because no Income Tax relief is available on contributions to an ISA. National Savings Premium Bond winnings and interest from National Savings Certiﬁcates and Children’s Bonus Bonds are exempt from Income Tax. 30 A THOROGOOD SPECIAL BRIEFING . they are very ﬂexible and can be cashed in at any time.100 can be held in cash. These limits take effect for people over the age of 50 on 6 October 2009. of which £5. However. They have become more popular of late because commercial property funds are now included in the list of permitted investments.
A Thorogood Special Brieﬁng Chapter 3 Sole Traders and Partnership Loss Relief Property income .
the loss for a tax year will be the loss for the accounting period ending in that year. in this case it may be more beneﬁcial to carry the loss forward against future trading proﬁts (see below). For example. 32 A THOROGOOD SPECIAL BRIEFING . whichever year is chosen ﬁrst. carried forward and set off against future proﬁts from the same trade. A claim must be made to relieve a loss in this way.) Trading losses can be set off against other income. a loss for the year ended 30 April 2009 will be treated as incurred in 2009/10. Set-off against other income A trader incurring a loss in a tax year may set the loss against other income. In the case of a continuing business. the other income in that year must be exhausted in full before the balance is used against the other year. (Income from the rental of property does not qualify as a trade and is dealt with separately below. Special provisions apply in the opening and closing years of a trade. provided that the trade was carried on with a view to proﬁt and on a commercial basis. savings. The loss can be set off against other income for the same tax year or the preceding tax year in any order. provided that. The time limit is twelve months from 31 January following the end of the tax year of the loss.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Chapter 3 Sole Traders and Partnership Loss Relief Sole traders and partnerships who incur a loss in the course of a trade are eligible for loss relief. or used in reduction of capital gains. which may arise for example from salary. property income or another separate trade. This may mean that personal allowances will be wasted.
3 S O L E T R A D E R S A N D PA R T N E R S H I P
Mrs Newland has the following income: 2008/09 £ Salary Interest Rental income Trading proﬁt Trading loss How should the loss be utilised? 2008/09 £ Other income Loss carried back Taxable income 50,000 (18,000) 32,000 2009/10 £ 40,000 – 40,000 30,000 2,000 8,000 10,000 – 2009/10 £ 34,000 1,500 4,500 – (18,000)
Loss relief is claimed in the year in which a larger slice of income falls within the higher rate band. In 2008/09, assuming that she claims the standard personal allowance, the amount of income before the loss relief claim falling within the higher rate band is £9,165 (£50,000 – £6,035 – £34,800). Having decided to set the loss against the income in 2008/09 ﬁrst, Mrs Newland cannot restrict this in order to set it partly against the higher rate income in 2009/10.
As a temporary measure, trading losses incurred in the tax years 2008/09 and 2009/10 may be carried back three years. The maximum loss which may be carried back is £50,000 for each of 2008/09 and 2009/10, with the loss being set against later years ﬁrst.
Carry-forward against proﬁts of same trade
Losses not utilised against other income or chargeable gains may be carried forward and set off against proﬁts of the same trade. There is no time limit – the loss is carried forward indeﬁnitely, although an election for carry-forward must be made within ﬁve years of 31 January following the tax year of the loss.
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TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S
Taking the previous example further, Mrs Newland has the following income in 2010/11: £ Salary Interest Rental income Trading proﬁt 35,000 2,500 6,000 20,000 63,500 The biggest tax saving would be achieved if she were not to carry the loss back but instead to carry it forward and set it off against the trading proﬁt in 2010/11. In this way, all of the loss would be used in the reduction of income within the higher rate band. However, she would have to wait longer for the relief.
Set-off against capital gains
Trading losses may be set off against capital gains for the same or the previous tax year. The time limit for the claim is the same as for a claim to utilise the loss against other income. Set-off against capital gains is allowed only if all other income for the year in question has been exhausted. This may mean that personal allowances will be wasted. The maximum set-off under these provisions is the capital gains for the year less any capital losses for the same year and capital losses brought forward. The annual exempt amount (see Chapter 7) may therefore be wasted.
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3 S O L E T R A D E R S A N D PA R T N E R S H I P
Miss Claypole has the following income and chargeable gains: 2008/09 £ Salary Trading proﬁts Trading losses Capital gains 10,000 3,000 – 10,000 2009/10 £ 11,000 – (18,000) 3,000
She could elect to set the 2009/10 loss against income and capital gains for 2008/09 but would thereby waste personal allowances and part of the annual exemption. Income would be reduced to nil and chargeable gains would be reduced to £5,000, leaving £4,600 of the annual exemption unused. If future trading proﬁts are reasonably certain, a better option would be to carry the loss forward. If capital gains were above £14,600 in 2008/09, a claim might be more worthwhile, although the personal allowance would still be wasted.
Opening year losses
Losses arising in any of the ﬁrst four tax years of a new trade can be carried back and utilised against the trader’s total income for the three years preceding the year of loss. They must be set off against earlier years ﬁrst. For example, a trade’s ﬁrst year of assessment is 2009/10. Losses can be set against other income in 2006/07, then – if all of the income of 2006/07 is exhausted – 2007/08, and ﬁnally 2008/09. A loss in 2012/13 can be set off against income in 2009/10 and the following two years. The potential advantage over the loss claims previously discussed is that an individual may have been paying Income Tax at the higher rate in earlier years, perhaps while in salaried employment. Tax relief is also available more quickly than if the loss were carried forward. A claim for relief of a loss in this way should be made within twelve months of 31 January following the tax year in which the loss arises. Many traders mistakenly believe that losses can be utilised twice, in the same way that proﬁts can be taxed twice in the early years.
A THOROGOOD SPECIAL BRIEFING
EXAMPLE A trader commences trading on 1 September 2009 and makes a loss of £24. he had no other income apart from the business. the basis year is the twelve months from 6 April to 5 April.000.000 in the year ended 31 August 2010. the basis period for tax is the ﬁrst twelve months of the business. It will be assessed as follows: 2008/09 2009/10 Date of commencement (1 January 2009) to 5 April 2009 Twelve months from the date of commencement 1 January to 31 December 2009 2010/11 Twelve months to the accounting date 1 November 2009 to 31 October 2010 (Note that. The same does not apply to losses. After 31 March 2009. when he left to start his own business. If this period is twelve months or more. He was previously an employee on a salary of £40. where an accounting period ends in the second tax year and is less than twelve months as above.000 which did not change from 1 January 2006 until 31 March 2009. the basis period is the twelve months to the accounting date.) The proﬁts for the periods from 1 January to 5 April 2009 and from 1 November to 31 December 2009 are taxed twice. Where there is no accounting period ending in the second tax year. though overlap relief is given when the business ceases. so any loss made from 1 January to 5 April 2009 can be attributed to 2008/09 only and not to 2009/10. What is the best way to utilise the loss? 36 A THOROGOOD SPECIAL BRIEFING . In the year ended 31 August 2011 he makes a proﬁt of £30.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S EXAMPLE A proﬁtable business commences trade on 1 January 2009 and has a yearend of 31 October.
it is ignored and netted off the loss).3 S O L E T R A D E R S A N D PA R T N E R S H I P £ Loss in 2009/10: £24. The ﬁnal twelve months of trading are split into two periods: the period to 5 April and the period from 6 April.000 The loss in 2009/10 could of course be set against the income in 2008/09 under the usual rules of set-off against other income.000 x 7/12 Loss in 2010/11: 12 months to 31 August 2010 Less already given 14. A better option is to carry the loss back and use it against higher rate income.000) 10.000 (14.000 24. The loss available for relief is the total of the losses in the two periods (note that.000 – 40. The loss is utilised against proﬁts of later years ﬁrst. 2006/07 £ Salary Loss relief 40. A THOROGOOD SPECIAL BRIEFING 37 .000 (10.000 2007/08 £ 40. if either period produces a proﬁt. but he is then only a basic-rate taxpayer. but the loss in 2010/11 could not be used in this way because there is no taxable income either in 2009/10 or in 2010/11.000 2008/09 £ 40.000) 30.000 The loss could be carried forward to 2011/12.000) 26.000 (14. the losses in the last twelve months of trading can be relieved against proﬁts for the last tax year and the preceding three tax years. Terminal losses When a trade ceases.
Each individual partner can therefore decide how best to utilise losses.000 (13.333) 6.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S EXAMPLE Mr Bishop’s trading results prior to cessation of trade on 31 August 2010 are as follows: £ Year ended 31 December 2006 31 December 2007 31 December 2008 31 December 2009 Period ended 31 August 2010 Proﬁt 50. and losses are treated similarly.625) (23.000) – 2009/10 £ 5.000 Proﬁt 5.000 is treated as incurred in 2010/11 and may be carried back to 2009/10. it could not then be relieved in full. the loss of £25.000 (5.667 2008/09 £ 5.000 Proﬁt 20. Mr Bishop will beneﬁt from a terminal loss relief claim as follows: £ 1 September 2009 to 5 April 2010 £25.000 x 4/12 6 April 2010 to 31 August 2010 £25.000 Loss 25.000 x 3/8 less £5.000 (5. Partnerships Proﬁts of a partnership are distributed between the partners in accordance with the partnership sharing agreement.000) – (15.000 x 5/8 Total loss The loss is relieved as follows: 2007/08 £ Proﬁt Loss relief 20.708) A claim for relief of a terminal loss should be made within ﬁve years from 31 January following the tax year of discontinuance. 38 A THOROGOOD SPECIAL BRIEFING .333) (7.000 Proﬁt 5. However.000 Under normal rules.
property dealing. market gardening and mining are also taxed as trading income. it is usually considered to be revenue expenditure (and therefore allowable).000 and his share of the loss is £12.000 in the year to 31 December 2008. He is therefore a higher rate taxpayer in 2008/09 and should elect to carry the loss back.000. Property income Income from property is not treated as trading income and any proﬁts or losses are taxed separately. Mr Stanton’s share of the proﬁt is £48.000 and her share of the loss is £3. There is a wealth of case law on what constitutes revenue and capital expenditure. whereas if it simply restores the building to its original state. She is a higher rate taxpayer in 2009/10 because of her salary. Work is normally of a capital nature (and therefore disallowable) if it improves the building.000 in the year to 31 December 2009. However.3 S O L E T R A D E R S A N D PA R T N E R S H I P EXAMPLE Mr Stanton and Miss Berkeley are in partnership. A THOROGOOD SPECIAL BRIEFING 39 . Miss Berkeley has income from another source in the form of salary of £50. which involves the purchase of properties with a view to generating proﬁts by reselling them. The partnership sharing agreement states that proﬁts and losses are shared between Mr Stanton and Miss Berkeley in the ratio 80:20. They make a proﬁt of £60.000. Proﬁts from hotels. It is not possible to treat it as earned income for pension purposes. and she should therefore elect to set the loss against income in 2009/10. is considered to be a trade. Rental income is always treated as property income. and a loss of £15.000 from 1 April 2009 onwards. Revenue or capital? Taxable proﬁts from property consist of rental income from all UK properties less allowable expenditure. Miss Berkeley’s share of the proﬁt is £12.
• Claim an annual allowance for wear and tear. The loss which can be utilised in this way is restricted to the capital allowances for the year net of balancing charges. 40 A THOROGOOD SPECIAL BRIEFING . lifts and electrical systems have been held to be plant. Losses may be set against total income of the same or the following tax year if they include capital allowances. If works are to be carried out during a tenancy. If residential property is let furnished. This will be the case if it is part of the apparatus for carrying on the business within the property. the tenant may have more ﬂexibility than the landlord for the relief of the expenditure. which is 10% of the rental income net of council taxes and water rates paid by the landlord. A landlord may have difﬁculty in arguing that a refurbishment qualiﬁes as plant. This is because the test of whether an item qualiﬁes as ‘plant’ – and is therefore eligible for capital allowances – revolves around whether it performs a business function. cookers. though the last of these depends on the nature of the business being carried on. Loss relief Losses from a property business can normally only be carried forward and used against future proﬁts from property.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Some capital expenditure nevertheless qualiﬁes for capital allowances (see Chapter 6) as it falls under the deﬁnition of ‘plant’. there are two options: • Claim expenditure on replacement furniture as it occurs (but not on the initial purchase of furniture). whereas the landlord’s options are far more restrictive. whereas tenants may be judged to be carrying out the work for the speciﬁc needs of their business. Other situations FURNISHED LETTINGS Capital allowances are available only on property let commercially. It can sometimes be more tax-efﬁcient for the tenant to carry out repairs instead of the landlord and for the landlord to offer a rent-free period in return. In these circumstances it may be more tax-efﬁcient for the tenant to carry out the repairs in return for a reduction in rent. Alarm systems. The tenant may be able to carry losses back or claim group relief.
If the annual gross rental income exceeds £4.3 S O L E T R A D E R S A N D PA R T N E R S H I P The landlord will need to consider the likely amount of future renewals of furniture before deciding which treatment to adopt. They allow an individual to let furnished residential accommodation within his own residence for up to £4. Faster relief is normally given by claiming the annual 10% allowance. Note that the accommodation must be let for residential purposes. This special treatment will be withdrawn from 6 April 2010. during a tax year. The criteria for furnished holiday lettings are very detailed. there is a choice of treatments. Additionally.250. they can be treated as earnings for pension purposes and they qualify for certain Capital Gains Tax reliefs when sold (see Chapter 7). Either the excess over £4. but the most important are that.250 per annum free of tax. the property must be available for letting for 140 days and actually let for 70 days. A THOROGOOD SPECIAL BRIEFING 41 . RENT A ROOM RELIEF The rent a room relief provisions give scope for tax savings. furnished holiday lettings are taxed as trading income and therefore a more generous treatment is available for losses. as the treatment must usually be adopted consistently from one year to the next. and a director cannot therefore let an ofﬁce to his company within his home. or the net rent after allowable expenditure is taxed (this will apply if no election is made). FURNISHED HOLIDAY LETTINGS Until 5 April 2010.250 can be taxed (the taxpayer must make a written election to do this within twelve months of 31 January following the tax year). and no one person should occupy it continuously for more than 31 days in a ﬁve-month period.
In 2009/10 he should elect to tax the excess over £4.500 (3.250.250 (£250).500 2010/11 £ 5.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S EXAMPLE Mr Walden lets a room in his house. The income and expenditure are as follows: 2008/09 £ Rental income Expenditure Proﬁt 4.000) 3.000 (1.000 2009/10 £ 4. In 2010/11 he should withdraw the election and will be taxed on the net rents of £500.500) 500 There is no tax in 2008/09 as the rental income falls below £4.000) 1. 42 A THOROGOOD SPECIAL BRIEFING .000 (4.
A Thorogood Special Brieﬁng Chapter 4 Chapter – Income Tax of Individuals Allowances Extension of basic rate band Overseas income .
This £2. They include the personal allowance. The wife may claim half of the minimum allowance (£1.000. Because it is simply given as a tax reducer.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Chapter 4 Income Tax of Individuals Allowances Most Income Tax allowances are a matter of fact and there is no scope for tax planning. but it has been eroded in recent years and is now available only where one spouse was born before 6 April 1935.475. the personal allowance is reduced by £1.000. however.900 or less.965 if the husband is 75 or over at the end of the tax year and has an income of £22. the full minimum amount may be transferred.670 is. The married couple’s allowance may be transferred between spouses. Based on the 2009/10 personal allowance of £6.950 will have no personal allowance. 44 A THOROGOOD SPECIAL BRIEFING . The marginal Income Tax rate for those earning just above £100. A husband may claim a married couple’s allowance of £2. If both parties make a claim before the start of the tax year. The personal allowance is gradually reduced to nil from 6 April 2010 for those earning over £100. The allowance is given on a sliding scale depending on the age of both spouses and the level of the husband’s income. which may be increased beyond the age of 65 if income is below certain levels (see Appendix). This is given as a tax reducer and attracts tax relief at 10% – a tax reduction of £267. For every £2 of income above £100. and it can be increased to a maximum of £6. Details are given in the Appendix.670 if he lives with his wife at any point in the tax year 2009/10.000 will therefore be 60%. a minimum. a person with income of above £112. it makes no difference if the wife pays Income Tax at the higher rate and the husband does not.335) unilaterally. however. The opportunity for tax planning arises because the allowance can be transferred between spouses.
000. The right to transfer all or half of the allowance remains.490) 2.000 (9.4 C H A P T E R – I N C O M E TA X O F I N D I V I D U A L S If the husband’s (or wife’s. In both cases. Extension of basic rate band Taxpayers who are in the higher rate band may bring some or all of their income back into the basic rate band by making payments either to charities or to personal pension schemes.000 and Mrs Hatﬁeld £20. What is the most beneﬁcial use of the married couple’s allowance? Mr Hatﬁeld Mrs Hatﬁeld £ Income Personal allowance (age-related) Taxable income Tax liability at 20% Married couple’s allowance £6.965 x 10% Excess to Mrs Hatﬁeld (502) – (194) 1.510 502 £ 20.878 12.360 2.000 (9. A couple who married before 5 December 2005 may make a joint election to be brought within these rules.072 There has been an extension to the married couple’s allowance for marriages and civil partnerships entered into from 5 December 2005: the allowance is given to whichever individual has the higher total income for the year. EXAMPLE Mr Hatﬁeld has annual income of £12. A notice must be given by ﬁve years after 31 January following the tax year.640) 10. if the joint election has been made) tax liability is insufﬁcient to take advantage of the married couple’s allowance. A THOROGOOD SPECIAL BRIEFING 45 . The grossed-up payment is then added to the basic rate band. Mr Hatﬁeld is 71 at 5 April 2010 and Mrs Hatﬁeld 76. the payment is deemed to have been made net of basic rate tax. the unused amount can be transferred to the wife (or husband).
For the three years 2008/09 to 2010/11.125 x 80% = £1. Mr Hitchin will pay £1. His higher rate band will rise to £39.000 (6. Net payment needed £2. This does not apply to newsletters or to reduced or free entry to properties managed by the charity for public beneﬁt (which is why subscriptions to the National Trust qualify for Gift Aid).700. as opposed to goods and services) and signing a declaration that they have paid sufﬁcient Income and Capital Gains Tax in the year to cover the tax reclaimed by the charity. the charity can reclaim a transitional Gift Aid supplement to bring it up to the amount it would have been able to claim at the old 22/78 rate which applied up to 2007/08.125.475) 39. a payment made in 2009/10 can be treated as made in 2008/09 if a claim is made 46 A THOROGOOD SPECIAL BRIEFING . There are limits on other beneﬁts (see Appendix).000.700 and the charity will reclaim tax of £425 (20/80).400 = £2. it is not a bona ﬁde donation.525. as these are known.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Gift Aid Individuals who wish to make donations to a charity while reducing their tax liabilities can do so by making a donation (which must be in the form of cash.525 Excess over higher rate band £39. Gift Aid donations.525 less £37. A pitfall of Gift Aid is that there are restrictions on beneﬁts which can be received by the donor from the charity. In principle. The effect of this is that his Income Tax is reduced by 20% of the gross gift. It is possible to carry back a Gift Aid donation to the previous year – for example. can be made to UKregistered charities only. if any beneﬁt is received in return for the payment. EXAMPLE Mr Hitchin has income of £46. How much should he donate by way of Gift Aid in order to bring his income below the higher rate band? £ Income Personal allowance Taxable income 46.
000 and £180. Overseas income There is scope for very large tax savings by ceasing to be resident in the UK. Between £150. contributions were restricted to an age-related percentage of ‘net relevant earnings’. ordinarily resident or domiciled in the UK. Of course.000 will obtain relief at only 20% on pension contributions. Until 5 April 2006. ‘Earnings’ arise from employment or trading income. An individual may be resident. The 2009 Budget announced a number of measures which adversely affect high earners. A new regime for personal pensions came into force on 6 April 2006. dividends or rental income. but some individuals consider this worthwhile. and earnings from pensionable employment (where the employer operated an occupational pension scheme) did not count towards net relevant earnings. but not from savings. higher rate pension relief will be restricted. For these taxpayers. a taper relief will apply. Under the new regime. Those earning above £180.000). an individual can be a member of both occupational and personal schemes. A THOROGOOD SPECIAL BRIEFING 47 . Taxpayers with income of over £150. The withdrawal of the personal allowance for those earning over £100. These terms are considered in turn.000.000 will be subject to a new top rate of Income Tax of 50%. The detailed rules have yet to be published at the time of writing. Individuals who pay tax at the higher rate can make a pension payment to reduce their Income Tax. drastic action is required in order to bring about non-residence. Personal pension contributions A payment to a personal pension scheme is grossed up and increases the higher rate band in exactly the same way as a Gift Aid donation.4 C H A P T E R – I N C O M E TA X O F I N D I V I D U A L S by 31 January 2010. The maximum gross contribution is now the higher of £3.600 and 100% of ‘earnings’ (subject to a maximum of £245.000 was mentioned earlier in this chapter. This would be beneﬁcial if the taxpayer were in the higher rate band in 2008/09 but not in 2009/10.
If an individual regularly visits the UK and has accommodation which is available to him for at least three years. 48 A THOROGOOD SPECIAL BRIEFING . the statement of a desire to be buried in the new country. and it implies greater permanence. it is taxable in the UK. residence begins on the ﬁrst day of the ﬁfth year. If an individual is physically in the UK for an average of 91 days per year over four successive tax years. The 91-day test for residence also applies to ordinary residence. or the movement of family to that country. the sale of all UK property and the purchase of property in the new country of domicile. even if their average over the last four tax years has been 91 days or more. Ordinary residence Ordinary residence is more difﬁcult to deﬁne than residence. Domicile An individual can have only one domicile. Foreign income Foreign income is usually taxed on an arising basis. the individual may acquire a ‘domicile of choice’ which involves physically moving to another country and severing ties with the former domicile. Normally individuals who have lived in the UK throughout their lives are ordinarily resident. which up to age 16 is normally the parents’ domicile (the ‘domicile of origin’). marriage to an individual already domiciled in the new country. even if they are not resident as a result of being absent for an entire tax year. Strong evidence is needed before Revenue & Customs will accept this – for example. After the age of 16. This means that. bank charges) are deductible. such as the purchase of a burial plot there. though any expenses outside the UK which are directly related to the collection of the income (for example. Individuals are non-resident if they do not visit the UK at all in a tax year. regardless of whether the income is remitted to the UK. that individual is ordinarily resident.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Residence An individual who is physically in the UK for at least 183 days in a tax year (usually ignoring days of arrival and departure) is UK-resident.
The latter contract is with an overseas subsidiary and the income is remitted to an offshore bank account. for example. they may choose to be taxed on all income arising.4 C H A P T E R – I N C O M E TA X O F I N D I V I D U A L S Individuals who are not ordinarily resident or non-domiciled in the UK can. Those with more than £2. thus avoiding the taxation of the income on the remittance basis. probably to a UK bank account. It is possible to use the foreign income to buy an asset abroad and then bring this asset into the UK. This means that the income is not taxed in the UK until it is received there. There does not in this case need to be a separate contract for time abroad. if any part of the duties is performed in the UK.000 ‘remittance basis charge’ each tax year. However. A THOROGOOD SPECIAL BRIEFING 49 . Employment income Many employees carry out part or all of their duties abroad or for an employer who is not resident in the UK. An individual who is non-domiciled in the UK – even if resident or ordinarily resident – is not liable to UK Income Tax on earnings from employment with a foreign employer carried out wholly outside the UK unless those earnings are remitted to the UK. Many foreigners working in London as city bankers take advantage of this by persuading their employers to give them two contracts of employment – one for their work in London and one for their work elsewhere. There was a change to the taxation of non-domiciles from 6 April 2008. there is a liability to UK Income Tax on the whole. claim to have foreign income (except income arising in Eire) taxed on a remittance basis. The proportion of salary which relates to work abroad is taxed only if it is remitted to the UK. they are never taxable. Consequently if the funds are never remitted. they will pay tax on only 70% of their income – an effective rate of 28%. Irrespective of domicile or residence. unlike for those who are resident and ordinarily resident but non-domiciled. however. 70% of their work is in London. Alternatively.000 of unremitted income and gains and who have been UKresident for seven of the previous nine tax years have to pay a £30. irrespective of whether it is remitted to the UK. an individual not ordinarily resident in the UK is able to have salary apportioned between income earned from working days within the UK and working days abroad. If.
50 A THOROGOOD SPECIAL BRIEFING . she will have to pay the £30.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S EXAMPLE Mrs Romney. If in future years she spends an average of at least 91 days in the UK and becomes UK-resident for seven out of nine years. working 65% of the time in the UK and 35% in the US. Her income is therefore apportioned. EXAMPLE Mr Wade carries on a trade which makes 40% of its sales in the UK and 60% in Germany. has a contract with a London bank.000 is free of tax unless it is remitted to the UK. She is not ordinarily resident as she neither has accommodation available to her for a three-year period nor spends an average of 91 days or more in the UK. It will then be more tax-efﬁcient if she elects to be taxed on the arising basis. when the proﬁts are apportioned between the UK part and the overseas part. but in 2009/10 he spends 200 days in the UK. A trade carried on wholly outside the UK is still wholly taxable in the UK if carried on by an individual who is resident and ordinarily resident.000 charge. Trading income Any trade carried on at least in part in the UK is taxed as UK income except in the case of an individual who is non-resident. he would be non-resident and then only 40% of the proﬁts would be taxable in the UK. He is resident and therefore the whole of the proﬁts are taxable in the UK. paid direct to a US bank. Her income is £100.000 but the remaining £35. If he were to restrict his time in the UK to 180 days. She is not required to pay the remittance basis charge as she is not UK resident. She is taxed in the UK on £65. she spends an average of 85 days in the UK and rents property on one-year leases. For the years 2006/07 to 2009/10. For a non-resident. or resident but non-domiciled. For an individual who is resident but not ordinarily resident. it is taxed on a remittance basis. domiciled in the US. He is not ordinarily resident in the UK. it is not taxable in the UK.000.
her tax liability is calculated as follows: Tax on non-savings income: 20% x £3.4 C H A P T E R – I N C O M E TA X O F I N D I V I D U A L S Dividends and interest Individuals who are non-resident can avoid the higher rate on dividends and interest.000 Tax on dividend income: 10% x £18.5% x £81.000 100. their tax liability cannot exceed the total of tax charged on non-savings income (ignoring the personal allowance) and tax deducted at source on interest and dividends.000 15.000 x 100/80 Dividends £90. Broadly. EXAMPLE Miss Stone has employment income of £10.000 in the UK.125 1.000 125. Her income is summarised thus: £ Employment income Interest £12.000 A THOROGOOD SPECIAL BRIEFING 51 .366 31.000 Personal allowance Taxable income (6.000 and net dividend income of £90. She also has net interest income of £12.000. Individuals who make a declaration that they are not ordinarily resident can receive interest from UK banks gross.000 x 100/90 10.525 If she is resident.525 Tax on interest income: 20% x £15.959 Less deducted at source Tax liability (13.959 705 3.475) 118.000) 18.888 26.875 32.
it is possible to achieve signiﬁcant tax reductions – in this case £16. but it is usually possible to obtain a credit for the UK tax paid so that the tax in the country of residence is correspondingly reduced. Certain countries do impose a wealth tax. A detailed analysis of the tax rates and rules in other countries is beyond the scope of this work.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S If she is non-resident.000 By being non-resident.000 15. there are 650 directors of UK companies who give their address as Monaco. Income may in theory be taxable in two countries.000 Less deducted at source Tax liability (13.000 10. although for individuals with a mid-range retirement income there is no signiﬁcant difference between the tax burden in the UK and that in popular retirement destinations such as France.000 Tax on dividend income: 10% x £100. the income will be taxed in the UK and maybe also the country of residence. Italy. though it is possible to be resident in no country. Tax in more than one country If individuals become non-resident. If a non-resident owns and lets property in the UK. Spain and Portugal.55% per annum on assets of more than €750.000) and Spain. Because days of travel to and from the UK do not count towards the 91-day threshold. houses many wealthy British business people who ﬂy to the UK on a Monday and return on a Thursday for most weeks of the year. Monaco. her tax liability is calculated as follows: Tax on non-savings income: £10.000 3. their income will generally be taxable in the country of residence. A further point to note here is that the letting agent acting 52 A THOROGOOD SPECIAL BRIEFING . An example would be foreign income which is taxed in the country of origin and also on the remittance basis in the UK. it is easy to remain non-resident and therefore only suffer tax deduction at source on dividends.000 2. According to one report.000) 2.000 x 20% Tax on interest income: 20% x £15. Double tax agreements exist between the UK and many other countries so that income is not taxed twice. such as France (starting at 0. a well-known tax haven.959.
provided that this arises from the same type of income as the foreign tax.4 C H A P T E R – I N C O M E TA X O F I N D I V I D U A L S for a non-resident landlord must deduct 20% of the rent and send it to Revenue & Customs. the tenant must make the deduction. UK residents in this position may set the foreign tax against their UK tax. tax relief may not be available under a double tax agreement. A THOROGOOD SPECIAL BRIEFING 53 . This is known as unilateral relief. If there is no letting agent. In some cases. The 2009 Budget announced that from 6 April 2010 the personal allowance would be withdrawn from individuals who are not resident in the UK but who claim UK personal allowances and reliefs as Commonwealth citizens.
A Thorogood Special Brieﬁng Chapter 5 Corporation Tax Losses Groups Purchase of a company’s own shares Substantial shareholding relief Corporate Venturing Scheme .
the marginal rate is 29.000) P = PCTCT plus franked investment income I = PCTCT 56 A THOROGOOD SPECIAL BRIEFING . Basic computation Trading income. a marginal rate applies. Charges on income are then deducted. and companies with PCTCT of £1. Apart from the carry-forward of trading losses. in the same way as dividends payable are not a deduction.500.500. a claim must be made to utilise trading losses against other income of the same or a different accounting period. Charges on income comprise only payments to charity. which happens automatically.000 pay tax at 21%. In order to aid an understanding of the relative advantages of the various options for utilisation of losses. The result is the proﬁt chargeable to Corporation Tax (PCTCT). The method of calculation is ﬁrst to apply the main rate of 28% to PCTCT and then to apply the following fraction by way of marginal relief: (U – P) x I/P x 7/400 U = the upper limit (£1. The relevant Corporation Tax rate is applied to this.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Chapter 5 Corporation Tax Losses This section focuses chieﬂy on losses incurred by a company in its trading activities.500. it is necessary to outline the rules for computation of Corporation Tax. The thresholds and rates are in the Appendix.000 and £1. income from other sources (such as property income and interest) and chargeable gains are added together.000 pay tax at 28%. Between £300.75%. Note that dividends receivable do not form part of PCTCT.000. There are three Corporation Tax rates for the year commencing 1 April 2009: companies with PCTCT of up to £300. If a company has received no dividend income in the period.
a proﬁt of £2.500.000. A THOROGOOD SPECIAL BRIEFING 57 .000 – £1.75% if there is no franked investment income.364) 273.636 Tenterden Ltd’s marginal rate is 30. Companies are associated if one controls another or both are under common control.100.636/ (£1.09% The marginal rate will always be 29.000 x 28% Marginal relief: (£1.000. 273. The purpose of this is to stop companies with. the upper limit will be £375.000) = 30.000 from splitting into seven companies and thus taking advantage of the small companies rate.000 and has received net dividends of £90.000. The limits are also reduced if the company has any associated companies.000.000. grossed up by 100/90.636 280.000.636 (63.5 C O R P O R AT I O N TA X Franked investment income consists of dividends received from another UK company.000. EXAMPLE Tenterden Ltd has PCTCT of £1.000/£1.000 – £300.09%: Tax Less tax at small companies rate: £300.000) x £1.000 and the lower limit £75. say. The Corporation Tax is computed as follows: £ Tax at full rate: £1.000 x 7/400 (6.000 Note that the upper and lower limits are reduced accordingly if the accounting period is less than twelve months. if Tenterden Ltd has two subsidiaries and is owned by another company.000) 210.100. The size limits are divided by the number of associated companies – for example.000 x 21% Tax at marginal rate Marginal rate £210.
losses in periods ending between 24 November 2008 and 23 November 2010 may be carried back three years.100. they are carried forward and utilised against proﬁts of the same trade only.000 58 A THOROGOOD SPECIAL BRIEFING .11 (Budget) £ 500. The amount of the loss which can be carried back in this manner is restricted to £50.000 31. the remaining loss may be carried back and used against the income of the previous twelve months.10 £ – (100.000 31. being relieved against later years ﬁrst. A claim for set-off in this manner must be made within two years of the end of the accounting period in which the loss arises. Carry-forward of losses If no claim is made to utilise trading losses against income of the same year or to carry them back. As a temporary measure.3.3.000 – 70. Carry-back of losses If the trading loss is set off against other income for the same year and this other income is insufﬁcient to relieve the loss in its entirety.09 £ Trading proﬁt Trading loss Chargeable gain 2.000 – 100.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Set-off of losses against other income A company may set a trading loss off against other income from any source. EXAMPLE Hampstead Ltd has the following results: Year ended 31. A separate claim must be made within the same time limit as for set-off against other income of the same year.000) 20. which includes chargeable gains.000 for each the accounting periods in which a loss is made.3.
All the periods are of twelve months except for the ﬁnal period.09 £ (20.000 (10.000 30.000 3. Terminal losses Losses incurred in the ﬁnal twelve months of a company’s trading may be set off against the other income for the previous three years.09 £ (10.000) – 30. the proﬁt for that period must be apportioned. however.000 to £470. EXAMPLE Harrow Ltd has the following results prior to ceasing to trade on 31 December 2009.000) 31. Cash ﬂow might be an issue.000) – 30.12.000 20.000 (5.000) A THOROGOOD SPECIAL BRIEFING 59 . still within the marginal rate band.6. whereas immediate relief could be claimed for carry-back. in this case. proving that losses should not necessarily be set off against the year with the largest PCTCT. This will usually mean that they can be carried back three years to a date which is midway through an accounting period.6.6. if carried forward. In the year to March 2011 the loss.000 5.75%.07 £ 3. as Hampstead Ltd will have to wait until 2011 to gain relief if the loss is carried forward.08 £ 5. In the following year it is 21%.000 (3.6.000) 10. The tax saving will therefore be at 29. Complications arise when the ﬁnal period is shorter than twelve months: part of the loss for the penultimate period can then also be carried back. Period ended 30.5 C O R P O R AT I O N TA X How is the loss best utilised? The tax rate in the year to March 2009 is 28%. This is the best option.000.06 £ Result Proﬁt Loss utilised 20. will reduce the PCTCT from £570.
6. Taking a simple example. 2.000 (last period and 6/12 x y/e 30. This is a very ﬂexible way of gaining immediate Corporation Tax relief for losses.000) (6/12 – carried back to 1. 60 A THOROGOOD SPECIAL BRIEFING . It is entitled to 75% of B Ltd’s distributable proﬁts. This 75% interest must meet three conditions: 1. No claim is required.06 Unrelieved 20. Group loss relief Companies which are members of a 75% group can utilise losses by setting the loss of one company against the proﬁts of another.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Loss memorandum: Terminal loss 30. A Ltd and B Ltd are in a 75% group. It owns 75% of B Ltd’s ordinary share capital. 3. Any loss remaining is carried forward and utilised against total income of subsequent periods. Groups Companies associated by various means can form a group. If these conditions are met.06) 2. Schedule A (property) losses Property losses are automatically set off against other income of the same accounting period.6. It is entitled to 75% of B Ltd’s assets on winding up. which gives opportunities for the saving of tax by setting the losses of one company off against the proﬁts of another.6. rather than having to carry them forward for set-off against future proﬁts.000) (3.000 of the loss in the year ended 30 June 2009 is also unrelieved. A Ltd owns 75% of B Ltd.09) (5. or by reducing tax on chargeable gains.07 30.08 30.000 The remaining £10.6.000) (10.1.
Therefore B. E can be added to the ﬁrst group. Take the following more complex example: A 90% 30% B 90% 70% E C 90% D A has an indirect interest of 81% in C. Losses may be surrendered between any companies in a group.9%. When deciding how or whether to apply group relief. the group should always consider setting losses off against the company with the highest marginal tax rate. A THOROGOOD SPECIAL BRIEFING 61 . B and C form a 75% group. but they must ﬁrst be set against the company’s other income for the year. A’s interest in D is only 72.5 C O R P O R AT I O N TA X An interest may be indirect. The surrendering company need not ﬁrst set the losses against its other income for the year. Most commonly. C and D form a 75% group. and therefore A. Schedule A (property) losses can also be surrendered. the losses in question will be trading losses. but B’s interest in D is 81%. This is because A’s effective interest in E is 93% (an actual holding of 30% and a 90% share of B’s 70%).
000 back and save tax at the marginal rate and apply group relief to the remaining £10.000 2008 £ 2009 £ What is the most beneﬁcial way of claiming group relief? Cromer Ltd could carry its loss back to 2007. saving tax at the small companies rate. Salthouse Ltd could set its loss against Cromer Ltd’s proﬁts for 2006. It could set the loss against Salthouse Ltd’s proﬁts for 2008. It could carry the loss forward to 2009 and save tax at the small companies rate. It can alternatively carry it forward but future results are uncertain.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S EXAMPLE Cromer Ltd and Salthouse Ltd have the following results: Year ended 31 December 2007 £ Cromer Ltd: Trading result Salthouse Ltd: Trading result Chargeable gain 100. If the companies have different accounting periods. The best option for Salthouse Ltd is to carry its loss back.000.000) – 170.000 (12.000. Salthouse Ltd is a large company paying tax at the full rate The best option for Cromer Ltd is to carry £20.000 – 700.000 (30.000 160. the loss can only be surrendered within the overlapping period.000 (remember that the small companies threshold is halved because there are two associated companies) and at the marginal rate on the next £20. In that year it paid tax at the small companies rate on the ﬁrst £150. Salthouse Ltd can carry its loss back and save tax at the full rate. 62 A THOROGOOD SPECIAL BRIEFING .000) 75. Group relief is simplest to operate when all companies have the same accounting period.
Additionally. Consortium relief operates on broadly similar lines to group loss relief.000 10. The same principle will apply to Stanford Ltd’s loss in the year ended 30 September 2010. Consortium companies must be trading companies.000 30. the relief is restricted in proportion to the member’s interest in the consortium company. and that when losses are surrendered from the consortium company to the members. Consortia For a consortium to be in place.000 Loss £ Brixworth Ltd made a loss in the year ended 31 December 2009.000) is available for group relief. Therefore only 9/12 of the loss (£7.000 10. except that losses may be surrendered only between the consortium company and the members (and not between members).000 20.5 C O R P O R AT I O N TA X EXAMPLE Brixworth Ltd and Stanford Ltd have the following results: Proﬁt £ Brixworth Ltd – year ended 31 December 2008 2009 2010 Stanford Ltd – year ended 30 September 2009 2010 25. of which 9/12 fell in Stanford Ltd’s year ended 30 September 2009. Therefore only 9/12 of the loss (£15. 20 or fewer companies (the consortium members) must each own 5% of another company (the consortium company). A THOROGOOD SPECIAL BRIEFING 63 . the consortium members must in total hold at least 75% of the ordinary share capital.500) is available for group relief. of which 9/12 fell in Brixworth’s year ended 31 December 2010.
The proﬁts of the consortium members are: Bibury Ltd £50.000.000 Crediton Ltd £80.000 Dorney Ltd £ 90.000 (74.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S EXAMPLE Addlethorpe Ltd is owned as follows: Bibury Ltd 30% Crediton Ltd 30% Dorney Ltd 37% Evesham Ltd 3% Addlethorpe Ltd makes a loss of £200. As for group loss relief.000 (60.000) – Crediton Ltd £ 80.000) 16. 64 A THOROGOOD SPECIAL BRIEFING . ownership of share capital and entitlement to proﬁts and assets are all taken into account.000 The loss not surrendered is £16.000 (50. Gains groups For a gains group to exist.000 Dorney Ltd £90.000) 20.000 (Evesham Ltd’s share and excess not claimable against Bibury Ltd). the parent must own 75% of the subsidiary and must have an indirect interest of at least 51% in each of the subsidiary’s subsidiaries.000 Addlethorpe Ltd’s loss is surrendered as follows: Bibury Ltd £ Proﬁt Less surrendered 50.
Capital losses of one group company cannot be relieved against chargeable gains of another. Companies sometimes buy other companies which own assets on which there is a potential loss. The transferee company then sells the asset with a consequent tax saving.5 C O R P O R AT I O N TA X EXAMPLE Albury Ltd owns 75% of Birtles Ltd. Gains groups provide an opportunity to save tax on chargeable gains.25%. but Dunsfold Ltd is not in the group. Hence Birtles Ltd cannot head a group which includes Chewton Ltd and Dunsfold Ltd. In theory. They then transfer those assets on a ‘no gain no loss’ basis and sell the assets outside the group. the transferor is deemed to have sold it for its original cost plus indexation. However. if both companies make a joint claim to do so. Special provisions exist to prevent this from happening. The pre-entry loss cannot be set against chargeable gains. it is necessary to transfer the asset from one to the other and sell it to relieve the capital loss. which owns 75% of Chewton Ltd. and a company which is itself a 75% subsidiary cannot stand at the head of a gains group. If a capital asset is transferred from one group company to another. if one company is about to sell an asset which generates a capital loss and another company has chargeable gains. as Albury Ltd’s effective interest in Chewton Ltd is 56. which removes the necessity to effect a physical transfer of the asset. Note that a company cannot be a member of more than one gains group. which in turn owns 75% of Dunsfold Ltd. A THOROGOOD SPECIAL BRIEFING 65 . Birtles Ltd and Chewton Ltd are in a gains group. and the transferee is deemed to have acquired it for the same value. A company wishing to dispose of a capital asset may therefore wish to transfer the asset to a group company which has a lower Corporation Tax rate. using the ensuing capital loss against existing chargeable gains. Albury Ltd. This preentry loss is normally computed by time-apportioning the loss between the periods before and after the company joined the group. they can treat the asset as if it had been transferred immediately before sale. the transfer is deemed to have been made at ‘no gain no loss’ – in other words.
but Zennor Ltd has surplus funds.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Purchase of a company’s own shares Usually when a company repurchases its shares from shareholders. Zennor Ltd therefore repurchases the shares from Ashton. Broadly. and the purchase must be for the beneﬁt of the trade. must have held the shares for ﬁve years (or three if they were inherited). More often than not – but not always – this latter treatment is more favourable for the shareholder. Barton and Chester do not have the funds to buy out Ashton. Occasionally it will be more beneﬁcial for the shareholder to have the transaction treated as a distribution – if there are already gains above the annual exemption. a shareholder with more than 30% of the ordinary share capital of a company is connected with it. Barton and Chester are equal shareholders in Zennor Ltd but Ashton increasingly disagrees with Barton and Chester. there is a dissenting shareholder. The vendor must also be UK-resident and ordinarily resident. it is taxed as a capital gain. as a dividend). For example Ashton. Perhaps most commonly.100 available before Capital Gains Tax becomes payable. Generally this second condition will be satisﬁed if a shareholder has retired. however. If certain conditions are met. The capital treatment applies only to unquoted trading companies. because higher rate taxpayers are liable for additional Income Tax on distributions. and must not be connected with the company immediately after the sale. 66 A THOROGOOD SPECIAL BRIEFING . for example. whereas there is an annual exemption of £10. the transaction is treated in the hands of the shareholder in the same way as a distribution (in other words. which leads to difﬁculties in the management of the group. died or simply wishes to withdraw equity ﬁnance. The capital treatment also applies if the purpose of the transaction is to enable Inheritance Tax to be paid on the death of a shareholder.
taking into account the interest in ordinary share capital and the entitlement to proﬁts and to assets on winding up. He has a shareholding in Martock Ltd which the company wishes to repurchase for £20.000 in the current year.000. there is a tax saving of £2. this A THOROGOOD SPECIAL BRIEFING 67 . provided that certain conditions are met. Substantial shareholding relief Substantial shareholding relief was introduced with effect from 1 April 2002. this is an exempt disposal.000) 15. if the conditions are met.000 and chargeable gains of £10. Would it be more beneﬁcial for Mr Leigh to have this treated as a distribution or as a capital payment? £ Tax on distribution No additional tax – basic-rate taxpayer.700 In the above example. It will therefore be necessary for the company to ensure that it breaches one of the conditions for a capital payment.000. Tax on capital payment Proceeds Cost Gain Capital Gains Tax at 18% 20. So if a company buys 20% of another company on 1 January 2007 and sells it on 1 January 2008. If it then buys another 5% on 1 July 2008 and sells it by 31 December 2008. perhaps by manipulating the transaction so that the shareholder retains a holding of at least 30%.000 (5. A substantial shareholding is one of at least 10%.5 C O R P O R AT I O N TA X EXAMPLE Mr Leigh has taxable income after personal allowances of £10.000 2. The shares were purchased ﬁve years ago for £5. Advance clearance for one treatment or the other may be obtained from Revenue & Customs. The principal feature is that there is no chargeable gain when a company disposes of a shareholding in another company. The shares must have been held in any continuous twelve-month period in the two years prior to disposal. the transaction must be treated as a capital payment. Note that.700 by treating the transaction as a distribution.
Should Shepton Ltd sell its assets and goodwill. Lullington Ltd has an opportunity to sell Shepton Ltd’s trade to Taunton Ltd. must not hold an interest of more than 30% of the investee company. The investor company. if it delays the sale of the 5% holding beyond 1 January 2009. if it in turn holds Shepton Ltd for twelve months. Taunton Ltd may not be as enthusiastic. There are numerous conditions. which must be a trading company. the seller may have to consider the buyer’s wishes. Corporate Venturing Scheme The Corporate Venturing Scheme operates in a broadly similar way to the Enterprise Investment Scheme (see Chapter 2). it can amortise this in its own proﬁt and loss account and claim the amortisation as a Corporation Tax deduction under the new regime for intangible assets which was introduced on 1 April 2002. If it purchases goodwill. Both investor and investee must be trading companies both for the twelve-month period and immediately after the sale. however. or should Lullington Ltd sell Shepton Ltd in its entirety? If Shepton Ltd sells the assets and goodwill. However. 68 A THOROGOOD SPECIAL BRIEFING . it will not be an exempt disposal. There may also be a chargeable gain on any plant and machinery if it is sold for more than its written-down value. the investing company may gain tax relief at 20% on the amount invested. it will beneﬁt from substantial shareholding relief. there is no chargeable gain provided that the twelve-month criterion is met and both are trading companies. if it purchases Shepton Ltd. EXAMPLE Lullington Ltd owns 100% of Shepton Ltd. there will be a chargeable gain on the goodwill. However. If a company subscribes for new ordinary share capital in a company which meets the conditions. In such a situation. if Lullington Ltd sells Shepton Ltd. there will be no tax allowance – though. which owns chargeable assets. However.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S is also an exempt disposal because a 10% shareholding was held for a twelvemonth period in the previous two years.
the relief is given. A THOROGOOD SPECIAL BRIEFING 69 . must not be controlled by another company. must be at least 20% owned by individuals who are not directors nor employees nor their relatives. Relief will. be withdrawn if the shares are sold within three years of their purchase. however. subject to a claim on the Corporation Tax Return. When the investee company has traded for at least four months following the date of the investment. the investee company must have had gross assets of no more than £7 million. and immediately afterwards no more than £8 million. Immediately before the purchase of the shares.5 C O R P O R AT I O N TA X The investee company must be unquoted. and must be a trading company (broadly deﬁned in the same way as for the Enterprise Investment Scheme). It must not have subsidiaries for which there are arrangements in force which would pass control to a third party.
A Thorogood Special Brieﬁng Chapter 6 Capital Allowances Plant and machinery – general principles Cars First-year allowances Short-life assets Industrial buildings allowances Disclaiming capital allowances .
The meaning of ‘plant’ has been considered by the courts in many cases. plant and machinery and goodwill. whether it is a sole trader. but it forms by far the largest part of assets eligible for capital allowances. Broadly. and plant. There is no simple test. stationery and raw materials are classed as revenue expenditure. A rule of thumb is that capital items tend to be used over more than one year. but this is spread over the life of the asset. the day-to-day running costs of a business. heat and light. such as wages and salaries. and a balanced judgement will often be necessary. the cost can be taken into account when computing a chargeable gain (see Chapter 7). and the opportunities for increasing the amount of the allowance and claiming it as early as possible. Second. Plant and machinery – general principles There is no statutory deﬁnition of plant and machinery. Capital items are those with which the business does not part but which belong to the capital structure.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Chapter 6 Capital Allowances A business. however. Items which merely provide the place or setting in which the business operations are performed are not considered to be plant and are therefore ineligible for capital allowances on plant and machinery. Broadly. It is capital allowances. First. Certain items. such as property. which form the subject of this chapter. Consequently they do not qualify for a full tax deduction in the year in which the expenditure is incurred. Relief for capital items can be given in two ways. will be able to treat most of its expenditure as revenue items and will therefore be able to claim a deduction against Income or Corporation Tax as appropriate. certain items qualify for capital allowances. These items provide the opportunity to make proﬁts or losses. it covers machinery in its widely understood sense. The question of what is capital and what is revenue has formed the subject of many a case. partnership or company. do not qualify as revenue items and are therefore capital in nature. so the cost is allowable as a deduction from proﬁt. The essential features are that it is kept for permanent use in the trade and performs a function in the business operations. 72 A THOROGOOD SPECIAL BRIEFING .
plus any additions in the year. which is the amount carried forward at the end of the previous year. a writing-down allowance of 20% of the cost is given in the accounting year of purchase (unless ﬁrst-year allowances are available – see below).000 After 30 June £ A THOROGOOD SPECIAL BRIEFING 73 .000 WDA* at 20% WDV* at 30 June 2010 (36. since 6 April 2008 for Income Tax purposes (1 April 2008 for companies) an annual investment allowance of 100% is available on the ﬁrst £50. As can be seen.000 on or about 30 June 2010. less the disposal proceeds of any assets sold in the year.6 C A P I TA L A L L O WA N C E S Items held by the courts to be plant include movable ofﬁce partitions. It wishes to sell an asset from the pool for £20.000 spent on plant and machinery. It does not matter when in the year the purchase is made: a business with a year-end of 30 September would gain faster tax relief by purchasing an asset on 29 September than it would if the same purchase were made on 2 October. Items held not to be plant include a canopy over a ﬁlling-station. Most plant and machinery goes into a ‘pool’.000 (40. Building Society window screens and a barrister’s books.000 – 200. EXAMPLE Fryerning Ltd has a pool of plant and machinery of £200. and the annual allowance given is 20% of the written-down value of the pool. shop fronts and stairs.000) 180. What are the consequences of delaying the sale to 1 July 2010.000) 160.000 (20. false ceilings. Additionally. However. swimming pools on a caravan site. the 2009 Budget announced that a ﬁrst-year allowance of 40% is available for 2009/10 (see below).000) 144. If an item qualiﬁes as plant and machinery. the distinction is a ﬁne one. assuming a Corporation Tax rate of 28%? Before 30 June £ Year ended 30 June 2010: WDV* at 1 July 2009 Disposal proceeds 200.000 200.000 at 1 July 2009.
a balancing allowance or charge arises by comparing the sale proceeds with the written-down value at the start of the year.120 (£4. there is a special treatment (those costing £12. A sole trader with a turnover not exceeding the VAT registration threshold (currently £68.000) 112. this treatment changes. If the written down value of the pool after deducting disposal proceeds but before making the 20% writing down allowance is less than £1.000 or less are simply treated as part of the general pool – there is no longer a separate pool for them).000 WDA at 20% WDV at 30 June 2011 (28. it is added to the general pool. the business may claim the entire value of the pool as a writingdown allowance. From the tax year 2009/10. insurance.000) 140. petrol. Otherwise. * WDA: writing-down allowance WDV: written-down value The writing-down allowance is increased or reduced accordingly for long or short accounting periods. though expensive cars already purchased continue to be treated under the old rules for a transitional period of ﬁve years.000 before the tax year 2009/10.000 x 28%).000 (20.000. it is added to a special rate pool and is subject to an annual writing-down allowance of 10%. If a car purchased from 1 April 2009 for a company (6 April 2009 for Income Tax purposes) has CO2 emissions of up to 160. Alternatively. the Revenue & Customs approved mileage rates can be used (40p per mile up to 74 A THOROGOOD SPECIAL BRIEFING .TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S WDV at 30 June 2010 Year ended 30 June 2011: Disposals 144.800) 115. They are treated individually and given a maximum annual writing-down allowance of £3. The private use element of all of the expenses – including capital allowances.000) has a choice of two treatments for the use of a car.000 160. This is partially offset in the second and subsequent years. road tax and other running costs – can be claimed. Cars For cars purchased for more than £12.000 The tax saving in the ﬁrst year achieved by delaying the disposal is £1.200 (28.000. When the car is sold.
unlike previous ﬁrst-year allowances which were available only to small and mediumsized businesses.000 miles per annum. Unlike standard writing-down allowances.000 of which half is estimated to be business mileage.500 x 40p 3. Should she claim actual costs or the mileage rate? £ Actual costs (50% private use) Capital allowances – WDA £15.500 There is a clear advantage here in claiming the mileage rate. but running costs tend to increase with the age of the car.6 C A P I TA L A L L O WA N C E S 10. The temporary ﬁrst-year allowance of 40% in the tax year 2009/10 announced in the 2009 Budget is available to businesses of all sizes.000 2. these A THOROGOOD SPECIAL BRIEFING 75 . 25p per mile thereafter).000. First-year allowances First-year allowances are designed to allow faster tax relief for purchases of assets. buys a car with CO2 emissions of 145 for £15.500 1. First-year allowances are available on all plant and machinery except cars or assets used for leasing. which may be a consideration in timing the purchase of an asset. The basis can be changed only when the car is changed.000. The position in future years is less clear – capital allowances will reduce after the second year. Her total mileage is 15.000 on 1 April 2009. EXAMPLE Miss Lawford. The running costs including petrol in the year ended 31 March 2010 are £2.000 x 50% Amount claimable Mileage 7.000 1. It is anticipated that there will be no ﬁrst-year allowance for the tax year 2010/11. a sole trader with a turnover of £50.000 x 20% x 50% Running costs £2.
it is not always the best course of action to claim ﬁrst-year allowances in full.000 and has exhausted its annual investment allowance for the year ended 31 March 2010. If an asset is disposed of and the proceeds exceed the balance in the general pool. The part added to the general pool is computed using the following fraction: First-year allowance unclaimed/Full ﬁrst-year allowance x Cost of asset EXAMPLE Maldon Ltd has a general pool brought forward of £10. there will be a balancing charge. and how much Corporation Tax will thereby be saved in the year of purchase (assuming a rate of 21%)? 76 A THOROGOOD SPECIAL BRIEFING . However.000.000 and one is bought for £15. An asset is sold in the year ended 31 March 2010 for £12. This can be avoided by not claiming the full amount of the ﬁrst-year allowance and instead adding part of the cost of the asset to the general pool. This advantage is even greater if a ﬁrst-year allowance is available. How much of the ﬁrst-year allowance should not be claimed.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S percentages do not change if the accounting period is longer or shorter than twelve months. The advantage of bringing a purchase forward so that it happens just before a year-end was highlighted earlier.
200 x 21%) in the year by restricting the ﬁrstyear allowance claimed.000) Addition FYA at 40% 15.000 A THOROGOOD SPECIAL BRIEFING 77 .000 (12.000 x £15.000 – (2.000 6.800 5.000) (2.200 * FYA: First-year allowance There is a tax saving of £252 (£1. 5.000 (6.200) 9.000) 9.000) Balancing charge 2.200 15.000 FYA restricted WDV brought forward Addition FYA FYA not claimed (6.000) 800 (5.000 (12.000 10.000 Disposal Transfer from FYA WDV carried forward 9.800 (2.000 WDV carried forward 9.000) 2.800 Added to general pool £800/£6.800 9.000) – 9.000 4.6 C A P I TA L A L L O WA N C E S FYA* £ FYA claimed in full WDV brought forward Disposal £ General pool £ Allowances £ 10.
Every short-life asset is placed in a pool on its own and a writing-down allowance is given in the usual way. Amongst other assets.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Short-life assets Not all plant and machinery goes into the general pool. 78 A THOROGOOD SPECIAL BRIEFING . Long-life assets enter the special rate pool (like cars with high fuel emissions) and attract a writing-down allowance of 10%. a balancing allowance is given. If the proceeds exceed the written-down value. there will be a balancing charge. These are generally assets with an expected useful life of four years or less. Cars. if this is expected to happen. long-life assets – those with an expected life of more than 25 years where the business spends more than £100. being the difference between the written-down value and the sale proceeds (if any).000 in a year on such assets – are another. By contrast. its written-down value is transferred to the general pool. there is a tax disadvantage and the asset should simply be placed in the general pool at the outset. If the short-life asset has not been disposed of by the end of the fourth year after its acquisition. There is no practical beneﬁt where the item remains in use for ﬁve years or more. faster capital allowances can be claimed on assets which the taxpayer elects to treat as short-life assets. assets used for leasing and those used partly for non-business purposes cannot be treated as short-life assets. The consequence is that. when it is sold or otherwise disposed of.
000) 60.000 (12. there is little scope for planning in the claim of industrial buildings allowances.000) 60. A THOROGOOD SPECIAL BRIEFING 79 .6 C A P I TA L A L L O WA N C E S EXAMPLE Thaxted Ltd purchases an asset for £100. correspondingly more tax will be paid in future years.400 in year 3 which at the full rate of Corporation Tax translates into a saving of £8.000 (40.000 General pool £ There is an additional allowance of £30.000 100.000) 48.000 (40.000 in the year ended 31 December 2009. so the basic rules are included here purely for completeness.400 (10.000) 48.000) 38.000) 38. and ﬁrst-year allowances are available.600) 30.512.000 (12. It has exhausted its annual investment allowance for the year.000 100. Of course.000 in 2011? Short-life £ Year ended 31 December 2009: Addition WDA at 40% WDV carried forward Year ended 31 December 2010: WDA at 20% WDV carried forward Year ended 31 December 2011: Disposal (10.000) (7.000 Balancing allowance WDA at 20% WDV carried forward – (38. What is the advantage of treating it as a short-life asset if it is to be sold for £10. Industrial buildings allowances Other than the timing of purchases to ensure that they fall shortly before the year-end (and disposals to fall shortly afterwards).
An election can be made to reduce capital allowances to this amount.525 are claimed.000. and consequently greater allowances can be claimed in subsequent years. storage or processing and are restricted to the costs of construction. In these circumstances it may wish to maximise the taxable proﬁt in order to relieve the losses. industrial buildings allowances are available only on buildings used for manufacture. Industrial buildings have a tax life of 25 years from the date they are ﬁrst brought into industrial use. If a sole trader’s proﬁt before capital allowances is only £8. This means that an allowance of 4% of the cost is given in the year of ﬁrst use and every year as long as the building remains in industrial use. The purchase of land is not eligible.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Broadly. There is no balancing adjustment for disposals on or after 21 March 2007. 80 A THOROGOOD SPECIAL BRIEFING . for example. and the deferral of capital allowances might be a way of achieving this. and the only tax allowance claimable on land will usually be in reduction of a chargeable gain when the land is ultimately sold. The same may apply if the business has losses brought forward which it wishes to utilise against the proﬁt for the year.475 will be wasted if capital allowances of more than £1. the personal allowance of £6. Disclaiming capital allowances It may sometimes be desirable not to claim full capital allowances on plant and machinery.
A Thorogood Special Brieﬁng Chapter 7 Capital Gains Basic principles Annual exemptions Transfers between spouses Capital losses Principal private residences Reliefs Chattels .
Most assets are chargeable assets. shares. and investments in other companies (but see substantial shareholding relief at Chapter 5). goodwill and other intangible assets. partnership or company. antiques and paintings. Computation – companies The pro forma computation for companies is: £ Disposal proceeds Original cost Enhancement expenditure Unindexed gain Indexation allowance Chargeable gain x (x) (x) x (x) x There is no annual exempt amount for companies. An individual may ﬁnd himself with chargeable gains on a second property (see principal private residence below).TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Chapter 7 Capital Gains Basic principles If a chargeable asset is sold. 82 A THOROGOOD SPECIAL BRIEFING . whether by an individual. This chapter explains how to minimise tax on chargeable gains but starts with a brief explanation of how Capital Gains Tax for individuals and Corporation Tax on chargeable gains for companies work. a chargeable gain or capital loss may arise. a business may ﬁnd itself with chargeable gains on land and buildings. Commonly. but items sold as part of trading activities are taxed under the provisions for Income and Corporation Tax.
two calculations were prepared: one using the actual cost and the other using the market value at 31 March 1982. though the annual exempt amount is ﬁrst deducted (see below). cost is ignored and the market value at 31 March 1982 substituted. and indexation no longer applies to assets disposed of by individuals. assets held at 5 April 1998 were indexed up to that date. many of the opportunities for tax planning in relation to chargeable gains have been removed.7 C A P I TA L G A I N S The indexation allowance is computed by reference to the retail price index on the date of acquisition and the date of sale. Taper relief was abolished for disposals on or after 6 April 2008. there was deemed to be no gain and no loss.000.000 and indexation is computed at £15. a business asset was one used by the taxpayer in carrying on a trade or profession. if the gain before indexation is £10. If both produced a loss. With the abolition of taper relief. For disposals by individuals prior to 6 April 2008. Much faster taper relief was given for business assets – 75% after two years’ ownership. For assets held before 1 April 1982. Taper relief was then applied and varied depending on whether the asset is a business or non-business asset and on the period of ownership. the lower loss was allowable. For disposals before 6 April 2008. there will be no gain and no loss. Broadly. Indexation can never be used to create or increase a loss – for example. This still applies to disposals by companies of assets held at 31 March 1982. Computation – individuals The pro forma computation for an individual is: £ Disposal proceeds Original cost Enhancement expenditure Chargeable gain x (x) (x) x Indexation ceased to apply for individuals. If there is a loss before indexation. A ﬂat Capital Gains Tax rate of 18% now applies to all chargeable gains by individuals. A THOROGOOD SPECIAL BRIEFING 83 . this is the allowable loss and no indexation is added. compared to 40% after ten years for a non-business asset. The lower of the two gains was taxed. partnerships and trusts from April 1998 following a major review of the Capital Gains Tax regime. even if those assets were owned before 6 April 1998. If one produced a gain and one a loss. Tables showing how taper relief operated up to 5 April 2008 are in the Appendix.
000 (20. The result is that.000 can be claimed.100 of gains are free of Capital Gains Tax. a higher gain could result from having made this election. which is payable only if chargeable gains less capital losses (see later) exceed this ﬁgure.000 (80. This is likely to be of beneﬁt if all or most of the pre-1982 assets which the taxpayer intends to sell in the future rose in value between the date of their acquisition and 31 March 1982. Should it make a rebasing election? (Ignore indexation. By 31 March 1982 their market value had risen to £80. 84 A THOROGOOD SPECIAL BRIEFING . for example. Hale Ltd would need to be aware that if it later sold any assets whose value had fallen between the date of the acquisition and March 1982. individuals are.100 for 2009/10.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Companies may still make a global rebasing election. This is irrevocable once made. The result is that the ﬁrst £10. it may make sense to sell half in one tax year and half in the next.000. If an individual wishes to dispose of shares with an estimated gain of £15. a loss of £30.000) In the absence of a rebasing election. and some of them are likely to be sold with a capital loss.000) (30. If the election is made. This is set at £10.000) 30.000. cost is ignored and the market value at 31 March 1982 substituted. The annual exemption cannot be carried forward and used in future years. for all assets held before 1 April 1982.000 Value in 1982 £ 50. the disposal will be treated as no gain and no loss. EXAMPLE Hale Ltd wishes to dispose of shares bought on 1 January 1974 for £20.) Computation based on: Cost £ Proceeds Cost/1982 value Chargeable gain/Capital loss 50. Annual exemptions Although companies are not entitled to an annual exemption.000.000 but the likely sale proceeds are only £50.
thus reducing any future gain. She sells the shares on 1 June 2009 for £10.7 C A P I TA L G A I N S thus ensuring that both gains are covered by annual exemptions. A transfer between spouses living together is deemed to be at no gain and no loss. The tax saving should outweigh any additional dealing costs. The disposal on 1 March 2011 is deemed to relate to the purchase on 1 January 1999 and there is a gain of £10. This of course runs the risk of a rise in the share price in the meantime. An individual would sell shares.000. and buy them back the next day. The disposal on 1 June 2009 is deemed to relate to the shares bought on 2 June 2009 and there is a capital loss of £100. the following applies also to civil partners. The annual exemption of both can be utilised. realising a gain just below the annual exemption. It is possible for the taxpayer’s spouse or even an ISA (Individual Savings Account) to repurchase the shares. EXAMPLE Mrs Lyndhurst buys 2. because an individual selling shares and then buying the same class of shares back within the next 30 days is deemed to have sold the shares which were bought subsequently.000 on 1 January 1999. so that the receiving spouse takes over the asset at its original cost.100. there was a practice known as ‘bed and breakfasting’. A THOROGOOD SPECIAL BRIEFING 85 . Any gain or loss on disposal will be calculated on the basis that the shares were acquired before the disposal rather than within 30 days afterwards.000 on 1 March 2011. for acquisitions since 22 March 2006. Anyone wishing to sell and buy back shares since 1998 must wait more than 30 days before repurchase if the above rule is not to apply. She sells them for £13. Before 1998. Transfers between spouses Since 5 December 2005. The annual exemption cannot be transferred between spouses. This is no longer possible. the 30-day rule does not apply to individuals who are non-resident and not ordinarily resident.000 and buys them back on 2 June 2009 for £10. but nevertheless there is a tax planning opportunity here. However.000 shares in Portchester plc for £3.
Capital losses A capital loss arises when the original cost exceeds the disposal proceeds.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S EXAMPLE Mr Kenton has gains of £4. An individual with numerous gains and losses on pre-April 2008 disposals should therefore allocate the losses against the gains with the lowest taper relief ﬁrst.900 when sold to a third party.000 and Mrs Kenton £12. Her gains would then have totalled only £10.000 (5. EXAMPLE Mr Hartland disposes of three non-business assets in 2007/08 as follows: Gain/(loss) £ Asset 1 Asset 2 Asset 3 20.000 10.000 in 2009/10. The inter-spouse transfer must be made before the assets are sold. Alternatively.000) Years owned 8 2 4 86 A THOROGOOD SPECIAL BRIEFING .100. Capital losses on assets disposed of before 6 April 2008 are set against chargeable gains before taper relief is given. The assets transferred should have been those which would produce gains of £1. it may be beneﬁcial to transfer an asset to the spouse and then sell it. if one spouse is a higher rate taxpayer but the other is not. What would have been the best way to reduce their tax liabilities? Mrs Kenton should have transferred assets to Mr Kenton.
000 10.000 (5.500 If the loss is set against asset 2. This is more beneﬁcial than using the losses in the year in which they are incurred.000) 5.000 (5.500 10. Losses unused in the tax year are carried forward and set against chargeable gains in future years. the gains for the year will be: £ Gain on asset 1 Taper relief at 30% Chargeable gain Gain on asset 2 Loss on asset 3 Net chargeable gain Total gains 20. A THOROGOOD SPECIAL BRIEFING 87 . which attracts no taper relief.000 19.000 20. the gains for the year will be: £ Gain on asset 1 Loss on asset 3 Gain before taper relief Taper relief at 30% Net chargeable gain Gain on asset 2 Total gains 20. Losses set against gains in the same year are used even if they bring the gains below the annual exempt amount.000) 15.7 C A P I TA L G A I N S If the loss is set against asset 1.000 (4.500) 10.000) 14. because carried forward losses are used only to the extent that they reduce the gains to the annual exempt amount.000 The difference is the 30% taper relief on the amount of the loss.000 (6. The loss should be set against asset 2.
Even if the two-year deadline is missed. But if it has been the principal residence at some stage during the period of ownership. If the owner was employed abroad for any of the period of ownership. provided that the house was actually occupied as the principal residence at some stage both before and after (not necessarily immediately before and after) the period of absence. 88 A THOROGOOD SPECIAL BRIEFING . A nomination of any of the three properties can be made within two years of the date of acquisition of the third. In principle. The same applies if the owner was required to live elsewhere in the UK by reason of his employment.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Principal private residences There is no chargeable gain when an individual sells a house which has been the principal private residence throughout the period of ownership. Hence the chargeable gain is time-apportioned over the period of ownership (ignoring periods before 1 April 1982). though. perhaps as little as one week. he must nominate it as the principal residence within two years of the date of acquisition. there will be an exemption for the last three years of ownership whether or not it was occupied during that period. and large tax savings can result from careful forward planning. Many taxpayers fail to do this and in this case Revenue & Customs will decide which was the principal residence based on the facts. There are numerous relaxations of this rule. This enables exemption to be claimed for the last three years of ownership of the holiday home. Note. If the property has never been the principal residence. In fact there is nothing to prevent the taxpayer nominating the holiday home as the principal residence and then re-nominating the main residence after a very short period. The stumbling block is that. Taxpayers often assume that there is a disadvantage in nominating the holiday home as the principal residence because it limits relief on the main residence. if an individual acquires a second residence and wishes to claim exemptions on this. There are further exemptions available. one acquired and simply let to a third party – can never be nominated as a principal residence. there can be another window of opportunity if a third residence is acquired. that a property never occupied by the taxpayer as a residence – for example. but in this case the exemption is limited to four years. a property which at some time has not been the principal residence of the individual is subject to Capital Gains Tax. It will also be exempt for the period of actual occupation. no chargeable gain accrues in respect of that period. there will be a chargeable gain calculated in the normal way.
letting relief is given at the lower of £40.000 x 8/20 x 20% 120. subject to the same provisions regarding occupation both before and afterwards. If the property has been let at any time and has at some stage been the principal residence. £ Gain Attributable to owner-occupation: £200.7 C A P I TA L G A I N S Additionally.000 and the relief attributable to owner occupation. For the last eight years she lets out 80% of the property.000 £ 200. the ﬁve years working abroad and the last three years.000 before time-apportionment. any other period of absence of up to three years will be exempt. There is also a letting exemption. She occupies it as her main residence except for the following periods: 1 January 1991 to 31 December 1993 1 January 1995 to 31 December 1999 1 January 2001 to 31 December 2009 Working elsewhere in the UK Working abroad Moved to a larger property The exemptions total eleven years – the three years working elsewhere.000 A THOROGOOD SPECIAL BRIEFING 89 . There is no three-year exemption for any of the period from 1 January 2001 to 31 December 2006 as this was not followed by a period of actual occupation. EXAMPLE Miss Bakewell owns and occupies a property for 20 years.000) Gain before letting relief 64. EXAMPLE Miss Melbourne owns a property from 1 January 1990 to 31 December 2009.000 16. The gain is calculated in the normal way but only nine-twentieths of it will be chargeable.000 x 12/20 £200.000 (136. There is a gain on sale of £200.
000 each.000) 24. 90 A THOROGOOD SPECIAL BRIEFING .000 Chargeable gain 64. Both the asset disposed of and the replacement asset must be ‘qualifying assets’.000 ensues on the goodwill. no tax will be payable straightaway. which includes land and buildings. This means that the chargeable gain will be deferred. On 1 January 2011 the company buys land and buildings for £600. but the base cost of the replacement asset will be reduced.000 (40. on 1 July 2009.000.000 Note that a couple jointly owning and letting a property will be able to claim relief of £40. including letting relief. with the effect that any chargeable gain on the eventual sale of the replacement asset will be correspondingly increased. If a couple is divorcing or separating and one party moves out of the marital home.000 relates to goodwill. this will become the principal private residence (although it is wise to make an election to this effect) and the usual reliefs will then apply. If the party moves to a house which was previously let.000. A chargeable gain of £300.000. ﬁxed plant and machinery and goodwill.000 Principal residence relief £136. Reliefs Rollover relief A business which sells an asset with a chargeable gain may opt to claim rollover relief if it reinvests the proceeds in another asset.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Gain before letting relief Letting relief – lower of: £40. The replacement asset must be acquired within the period starting one year before and ending three years after the disposal. EXAMPLE Morley Ltd sells an unincorporated business for £1. of which £400. he or she should ensure that the house is sold within three years in order to ensure that the sale is free of Capital Gains Tax.
The gain would be limited to the proceeds not reinvested. whether for value or as a gift. however. or more especially shares in their companies.7 C A P I TA L G A I N S The base cost of the new land and buildings is: £ Actual cost Gain rolled over Deemed cost 600. the relief would be restricted.000 (200. relatives (siblings and direct ancestors and descendants) and the relatives of the spouse.000 300. if Morley Ltd reinvested only £300. Holdover relief Owners of businesses may wish to gift certain business assets.000 It was at one time possible to gain rollover relief by reinvesting in the shares of an ordinary trading company. Gifts are usually treated as if the asset had been sold for its market value.000 Note that if only part of the proceeds were reinvested. civil partners have been treated in the same way as spouses. is given by deferring any chargeable gain and deducting the whole gain from the deemed cost of the new asset A THOROGOOD SPECIAL BRIEFING 91 .000) 100. still available via the Enterprise Investment Scheme (see below). Holdover relief. to third parties. These third parties will generally. but not always.000 (300.000.000) 300. the gain chargeable now would be as follows: £ Gain before relief Gain rolled over Chargeable gain Actual cost Gain rolled over Deemed cost 300. This relief became unavailable in 1998. For example. This also applies to any transfers to connected persons. The deﬁnition of ‘connected persons’ includes the spouse. A similar relief is. often also known as gift relief.000) 100.000 (200. Since 2005. be family members.
TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S to the donee. £ Chargeable gain: Market value Cost Gain held over Allowable cost: Market value Gain held over Deemed cost 200.000. If the company has investments which form more than 20% of its net worth. The held-over gain will become chargeable in the year of emigration.000 (80. (Until April 2003.000 200.) EXAMPLE Mrs Appleby gifts shares in an unquoted trading company to her daughter. which is irrevocable.000 (120. no relief is available. partial relief was available in these circumstances. Business assets are those used in the taxpayer’s trade or in a company in which the taxpayer holds at least 5% of the voting rights. The market value of the shares is £200. must be signed both by the donor and by the donee. the only assets qualifying for holdover relief are business assets and unlisted shares in trading companies (though transfers into a trust also qualify if Inheritance Tax is payable – see Chapter 9).000 Relief will be clawed back if the donee emigrates within six years of the end of the tax year of the gift. A claim for holdover relief may result in extra Capital Gains Tax being payable by the donee at a later date. Both parties sign a claim for holdover relief.000) 80. Gifts of shares qualify for holdover relief if the shares are in an unquoted trading company. Broadly. so the claim. 92 A THOROGOOD SPECIAL BRIEFING .000) 120. Holdover relief is available whether the transfer is made as a gift or at an undervalue. This deemed cost will be the market value. She acquired the shares in April 2000 for £80.000.
7 C A P I TA L G A I N S Gifts to charities A gift to a charity is an exempt disposal for Capital Gains Tax purposes.333). on a claim to A THOROGOOD SPECIAL BRIEFING 93 .000 x £50.000) and the cost of the shares would be £66. Incorporation relief works by rolling the chargeable gain over into this deemed cost of the shares.667 (£100. it may be difﬁcult to ﬁnd a purchaser and thus realise a capital loss. the gain is proportionately reduced. if Mr Swaffham received shares of £100.000 on the assets.000 less £33.000 (50. The acquisition cost will be: £ Market value Gain rolled over Deemed cost 150. realising chargeable gains of £50. Negligible value claims If an investment has gone badly wrong and the taxpayer paid an amount for the shares but they have fallen to a very small value. the gain held over would be £33. The gain will be computed by taking the disposal proceeds to be their market value at the date of transfer.000 If any other consideration is received in return for the assets. Incorporation relief Often the owner of an unincorporated business will make the decision to transfer the business to a company.000.000. For example.000) 100. This entails the disposal of the assets of the business and a consequent chargeable gain on assets such as land and buildings and goodwill. The market value of the shares received is £150. The investment can. EXAMPLE Mr Swaffham has run a business as a sole trader for many years.000/£150. He incorporates the business.333 (£100. The deemed cost of the shares issued to the shareholder of the new company will be the lower of the market value of the shares and the value of the assets transferred.000 and cash of £50.
There are restrictions on the type of company eligible for this investment and they are broadly the same as for Enterprise Management Incentive companies (see Chapter 1). there is no maximum limit on the investment. acquires ordinary shares in an unquoted trading company. 94 A THOROGOOD SPECIAL BRIEFING . There is no need for EIS Income Tax relief to have been claimed. but not if the proceeds fall below £6. If an individual who is resident and ordinarily resident incurs a chargeable gain on any asset and. This can create a tax planning opportunity. In the case of an asset owned jointly. which is known as EIS deferral relief. antiques and jewellery. Chattels Chattels are deﬁned as tangible movable property and often consist of paintings. Other chattels may attract Capital Gains Tax when sold.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Revenue & Customs.000 is multiplied by the number of joint owners. during a period starting one year before and ending three years after the disposal. although a capital loss can be claimed if appropriate. where it was also explained that EIS shares sold after more than three years are not treated as chargeable gains. Revenue & Customs maintain a list of quoted shares which have fallen to negligible value and on which claims will automatically be allowed. the exemption limit of £6. thus allowing the loss to crystallise and be used to reduce chargeable gains. There is a further Capital Gains Tax relief under the EIS. Chattels with a predicted useful life of 50 years or less which have not been used for business purposes are exempt from Capital Gains Tax. be treated as if it had been sold and immediately re-acquired at market value. Unlike for EIS Income Tax relief. Enterprise Investment Scheme The Income Tax beneﬁts of investing in companies under the Enterprise Investment Scheme (EIS) were highlighted in Chapter 2. the gain can be deferred and rolled over into the base cost of the shares.000. and it can be claimed even by investors who hold more than 30% of the ordinary share capital.
000. The chattels exemption would then have applied as the proceeds fall below the limit of £12.000 on which the chargeable gain is £8.7 C A P I TA L G A I N S EXAMPLE Mr and Mrs Langley wish to raise funds to build an extension to their house. Mr Langley owns a painting worth £10. how could the Capital Gains Tax have been avoided? Mr Langley should have transferred a 50% share of the painting to Mrs Langley well before the sale. he will be covered by the annual exemption. but if he does have other gains. Provided that he has no other gains.000. A THOROGOOD SPECIAL BRIEFING 95 .
A Thorogood Special Brieﬁng Chapter 8 Inheritance Tax General principles Taper relief Exempt transfers Reliefs Domicile Interaction with Capital Gains Tax .
000.000 while the Inheritance Tax threshold rose from £223. where house prices tend to be higher than the average. however. 98 A THOROGOOD SPECIAL BRIEFING . So a house alone will in many cases be sufﬁcient to ensure an Inheritance Tax liability. under Inheritance Tax. fall within the scope of Inheritance Tax on the individual’s death if they are ‘transfers of value’ – in other words. Originally designed to catch only the very wealthy in its net. which may be taxable during an individual’s lifetime. there is no Inheritance Tax. In the ﬁve years to 2004. If the transferor survives more than seven years after the date of the gift.000 to £182. They may. its tentacles have now spread to a very large number of home-owners. General principles Lifetime transfers Most transfers made during an individual’s lifetime are exempt from Inheritance Tax at the time of the transfer. Owners of businesses will generally own other assets in addition to their houses. Inheritance Tax has become a political issue. and careful planning is necessary to maximise the wealth which can be passed on to the next generation. they become potentially exempt transfers. especially in London and the South-East. the number of estates paying Inheritance Tax rose by 72%. a gift or a sale made at an undervalue. most gifts are exempt except for gifts made in the last seven years of a individual’s life – which are potentially taxable on death – and a small number of other gifts. Death within seven years of the transfer will mean that it will form part of the transferor’s estate for Inheritance Tax purposes. In this case. although taper relief (see below) will apply to transfers made between three and seven years before death. The difference between the two taxes is that. the average house price nationwide rose from £72. Between 1998 and 2007. notably gifts to trusts.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Chapter 8 Inheritance Tax Capital Transfer Tax was introduced in 1975 and was replaced by Inheritance Tax in 1986.000 to only £300.
prudent individuals will plan ahead and distribute gifts during their lifetimes in the hope that they will survive long enough for Inheritance Tax to be reduced or even not to apply at all. however. death occurs between three and seven years. which previously applied only to discretionary trusts. and the remainder of this chapter explains how to achieve this. As explained at Chapter 9.000 in 2009/10). There are several means of reducing the death estate and therefore the Inheritance Tax liability. Taper relief If death occurs within three years of a potentially exempt transfer. If. Any tax paid on chargeable lifetime transfers within the last seven years is deducted from the Inheritance Tax bill. A THOROGOOD SPECIAL BRIEFING 99 .8 I N H E R I TA N C E TA X The most common example of a chargeable lifetime transfer is one into a trust. If the total exceeds the nil rate band for the year of the transfer (£325. and the excess over the nil rate band is charged at 40%. To this are added potentially exempt transfers and chargeable lifetime transfers made in the seven years before death. Death estate The estate on death includes all property owned by the individual less liabilities. taper relief is applied. Inheritance Tax is payable on the excess at 20%. since 22 March 2006 transfers to interest in possession trusts and accumulation and maintenance trusts are brought into the charge. the full amount of the transfer is added to the estate. When a chargeable lifetime transfer is made. reducing the Inheritance Tax payable as follows: Death between 3 and 4 years 4 and 5 years 5 and 6 years 6 and 7 years Reduction 20% 40% 60% 80% Although precise planning is by nature impossible. it is aggregated with the total of all the chargeable lifetime transfers in the previous seven years.
000 (2.000 48.000) (175. and therefore the transfer is treated as if it had never been made.000) – 200.000 Gifts with reservation A word of warning – a potentially exempt transfer may be seen as a ‘gift with reservation’ if the transferee does not genuinely take possession of it.000) Chargeable to Inheritance Tax Inheritance Tax at 40% Taper relief at 20% Inheritance Tax payable Death estate Inheritance Tax at 40% (nil rate band fully utilised by potentially exempt transfers) Total Inheritance Tax 40. £ Potentially exempt transfer 1 February 2004 Nil rate band Chargeable to Inheritance Tax Potentially exempt transfer 1 March 2006 Nil rate band Less transfers in previous seven years 325.000 on 1 February 2004 and £200.000 25. Parents may give an antique to their children but continue to have it in their home.000 (325. They are still enjoying and beneﬁting from it.000 on 1 March 2006.000 £ 150.000 (150. He made potentially exempt transfers (net of the annual exemption) of £150.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S EXAMPLE Mr Shere dies on 1 January 2010 leaving an estate of £100. It will not be a potentially exempt transfer and instead will form part of the death estate. 100 A THOROGOOD SPECIAL BRIEFING .000. Calculate his Inheritance Tax liability on death.000 10.000 100.000) 8.
Exempt transfers Annual exemption The wise individual will make lifetime gifts with sufﬁcient regularity to utilise the annual exemption of £3. This is often used by parents who wish to give a share of the family home to their children who live with them. but professional advice is recommended before relying on this.8 I N H E R I TA N C E TA X Likewise. this is seen as a gift with reservation. parents often transfer their home into the name of their children but continue to live in it. The annual exemption can be carried forward for one year only if unused.000 at 40%). while the payout on death is exempt from Inheritance Tax. Potentially. There is an important let-out from the gifts with reservation rule. The only way to avoid this is by paying the children a market rent for occupation. The cash paid to buy the policy is a potentially exempt transfer. However.000. Note that the annual exemption does not apply to death transfers. A THOROGOOD SPECIAL BRIEFING 101 . A gift of more than a 50% share may well fail. Inheritance Tax of £8. An individual transferring a half share in a property to another individual is not seen as having made a gift with reservation if the transferor continues to meet the relevant share of the expenses. on death there will be a chargeable gain which is calculated as the increase in value from the premium to the surrender value on the day before death.400 could be saved (seven years’ annual exemptions of £3. The cash from the equity release is used to buy a life policy paying out a lump sum on death. Again. Some individuals use equity release schemes to generate a potentially exempt transfer. Gifts made before 18 March 1986 can never be treated as gifts with reservation.
000) 1.000 1.000 in year one.000 Small gifts exemption Individuals may make unlimited gifts during their lifetimes (though not on death) of up to £250 per person per tax year. £ Year one Transfer Annual exemption 2. Note that this is a maximum – a gift of £250 will be exempt from Inheritance Tax but a gift of £300 will be a potentially exempt transfer in full. 102 A THOROGOOD SPECIAL BRIEFING .000 (2.000 (3.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S EXAMPLE Mrs Harting makes potentially exempt transfers of £2.500 (3.000 in year three. £ Year three Transfer Annual exemption 4. £2.500 in year two and £4.000) (500) – No annual exemption carried forward – the remaining £500 from year one is lost.000) – Annual exemption carried forward Year two Transfer Annual exemption Annual exemption brought forward 3.
but this is no longer the case.000 2. Prudent individuals will draw up their wills accordingly. Until a landmark case (Bennett) in 1995. an amount up to the Inheritance Tax threshold is bequeathed to other parties and the remainder to the spouse. life policy premiums on behalf of another person and payments under deeds of covenant qualify for this exemption. are exempt from Inheritance Tax up to the following amounts: Gift made by Exemption £ Either parent Grandparent or great grandparent Bride or groom Any other person 5. birthday and Christmas presents. if they so desire.500 2. as the increase in value will be outside the estate. provided that they are made before the wedding or there is a binding promise. Gifts should be conditional on the marriage taking place. Marriage gifts Lifetime gifts to either party to a marriage. Normal expenditure out of income Gifts made during an individual’s lifetime which can be shown to be normal expenditure paid out of after-tax income (as opposed to capital) are exempt from Inheritance Tax. All that is now sought is evidence of a commitment to continue making the payments. the excess is subject to Inheritance Tax.500 1. ensuring that. Usually. The pattern of these gifts must have left the individual with enough income to live on without having to draw on capital.000 If a gift exceeds the maximum amount. Gifts to spouse Transfers to a spouse are exempt whether made during the lifetime or as part of the death estate. the Inland Revenue (as it was then known) was more likely to allow this exemption if payments were made over at least three years. it is more tax-effective to give it away now. A THOROGOOD SPECIAL BRIEFING 103 .8 I N H E R I TA N C E TA X Gifts of assets which rise in value If the individual owns an asset – such as a property or a stamp collection – which is expected to rise sharply in value over the coming years.
Given that transfers to spouses are exempt. her estate will be £800.000.) 104 A THOROGOOD SPECIAL BRIEFING . Assuming that the nil rate band has risen to £380.000.000 in the tax year 2009/10). The amount of the nil rate band transferred is the percentage of the pre-deceased nil rate band unused on death multiplied by the survivor’s nil rate band. How should Mr Hampton draw up his will? If Mr Hampton leaves his entire estate to his wife in the event of his pre-deceasing her.000. it will be exempt from Inheritance Tax. giving her a total of £570.500 to his children and the remainder to his wife.000. (This cannot be claimed by co-habitees.000 by the time of her death. (Note that if the nil rate band did not change between the date of his death and the date of her death. if the pre-deceased estate is left entirely to the survivor. the survivor has two nil rate bands on death (£650.000 and Inheritance Tax will be due on £40.000.500).500. They have two children. She would therefore beneﬁt from the entire nil rate band at the date of her death. Where one spouse or civil partner dies and leaves a survivor who dies on or after 9 October 2007.000 will have been unused. On her subsequent death.000 (50% of his nil rate band was unused and this 50% is applied to the nil rate band in the year of her death) will be transferred to her.) It is immaterial that the pre-deceased may have died many years before 9 October 2007.000 and Mrs Hampton owns assets of £200. If instead he leaves £162.500. The better option would therefore have been for Mr Hampton to transfer his entire estate to his wife. an extra £190. the unused nil rate band of the pre-deceased is transferred to the survivor. and again assuming a nil rate band at that time of £380. giving a total of £637. She will have beneﬁted from the transfer of his nil rate band. half of his nil rate band in 2009/10 of £325.000 plus the amount left to her by her husband (£437. On her subsequent death. EXAMPLE Mr Hampton owns assets of £600.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Since 9 October 2007 there has been a transferable nil rate band. Her estate will be her own £200. the amount of Inheritance Tax would be the same using either option. her total nil rate band will be £760. Inheritance Tax is therefore due on £67.
there is no tax beneﬁt to be gained from making them during an individual’s lifetime. but it passes to the children when he or she dies. Problems may arise if the matrimonial home is in the deceased spouse’s sole name. however. The biggest tax advantage is the right to leave assets to a surviving partner without an Inheritance Tax liability. One half passes to the children as they reach the age of majority. The remainder of the estate is divided into two halves. and if each partner has a minority shareholding in an unquoted company but the two added together form a majority holding. but not parents. If there are no children. Domicile rules are discussed later. If there are children. have the right to apply to the courts under the Provision for Family and Dependants Act 1975. pre-existing wills are revoked on registration of a civil partnership (as indeed they are on marriage). The Civil Partnership Act 2004 came into effect on 5 December 2005 and gives civil partners the same rights as spouses. The remainder passes to various relatives. plus £125. If Inheritance Tax is the only consideration.000 where a UK-domiciled spouse makes transfers to a non-domiciled spouse. Gifts to charities which either are registered or operate within the UK are exempt from Inheritance Tax. the valuation – and potential Inheritance Tax liability – may increase considerably. A THOROGOOD SPECIAL BRIEFING 105 .8 I N H E R I TA N C E TA X The exemption is limited to £55.000. The intestacy rules treat surviving spouses harshly. it is wiser to make gifts which are exempt during one’s lifetime only – the small gifts exemption. The surviving spouse does.000 and half of the balance. as this may have to be sold to meet the share attributable to the children. furniture and jewellery – plus a legacy of £200. the surviving spouse again receives all the personal chattels. Cousins may become civil partners. Civil partnerships do also carry pitfalls: if one partner wanted to leave his or her estate to children or anyone else. the surviving spouse has a life interest in the other half and receives interest from it. aunts or uncles. grandparents. siblings. Other gifts exempt both as lifetime transfers and on death Given that the following are exempt from Inheritance Tax on death. the surviving partner might try to thwart that. Civil partners need not live together. be of any particular sexual orientation or be in a sexual relationship. for example – and leave the following in the will. the surviving spouse receives all the personal chattels – such as cars.
The principal classes of business property are: • A sole trader’s business. the value is reduced by 100% – in other words. as the tax saving can be signiﬁcant. it will qualify for BPR. Business property relief Business property relief (BPR) reduces the value of business property in the death estate and in lifetime transfers. the National Gallery. It is important that businesses must be trading. no Inheritance Tax is payable. which requires that less than 20% of the net worth of a company be made up of investments – see Chapter 7). They include the National Trust. Land and buildings or plant and machinery owned by the transferor and used in the transferor’s business or in a company which the transferor controls (50% relief).000 votes polled. The deﬁnition of a trading company is more relaxed than in other areas (for example. It is important to take this into account when planning for Inheritance Tax.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Gifts to political parties are exempt if the party had two Members of Parliament elected at the last General Election. Reliefs So far in this chapter we have looked at various ways of reducing Inheritance Tax by making gifts largely of personal assets. holdover relief from Capital Gains Tax. a health service body and any government department. provided that certain conditions are met. Shares in a quoted company controlled by the transferor (50% relief). or one Member of Parliament and a total of 150. As long as a business is predominantly trading and does not hold investments which are worth more than half its value. Gifts to numerous national bodies are exempt. the British Museum. In most cases. or a partner’s share in a partnership (100% relief). 106 A THOROGOOD SPECIAL BRIEFING . • • • Shares in an unquoted company (100% relief). There are two reliefs which relate speciﬁcally to businesses and provide signiﬁcant opportunities for tax planning: business property relief and agricultural property relief.
If the property is transferred during an individual’s lifetime. Shares must have been owned for two years. If the shares or assets have been owned for less than two years but they replaced other property which would have met the criteria for BPR. however. or even if it is the subject of a binding contract for sale. BPR is given automatically on property which forms part of an individual’s estate. as the potential Inheritance Tax bill could be signiﬁcant. There is a minimum ownership period of two years. they are a business asset for Capital Gains Tax taper relief – they do not qualify for BPR. an important condition: the transferee must still own the property at the transferor’s death. If the property has been sold on in the meantime. EXAMPLE Mrs Warwick owns a building which she uses in a company controlled by her between 1 January 2007 and 31 December 2007. and BPR can then apply.8 I N H E R I TA N C E TA X Although furnished holiday lettings qualify as a trade for Income Tax and Capital Gains Tax purposes – for example. If the transferor dies within seven years. In order to claim BPR on the replacement building. There is a relaxation of the two-year rule. A THOROGOOD SPECIAL BRIEFING 107 . she must own it at least until 1 June 2009 before transferring it. There is. they will qualify provided that the combined ownership period is at least two out of the last ﬁve years before the transfer. BPR will not apply. it will be a potentially exempt transfer and will be exempt from Inheritance Tax if the transferor survives for seven years. there will potentially be a charge to Inheritance Tax. She sells the building and buys a replacement on 1 June 2008. and other assets must have been used in the business for two years. It is important to make the transferee aware of this condition.
000 (150. From 22 April 2009 it applies to such land anywhere within the European Economic Area. Farmers who wish to retire from farming should plan carefully if they wish to 108 A THOROGOOD SPECIAL BRIEFING . the APR provisions often result in a farmhouse becoming exempt. In principle it operates in the same way as business property relief.000 which includes shares in an unquoted company valued at £150. but the value it would carry if there were a covenant restricting it to agricultural use. Taxpayers frequently confuse Capital Gains Tax and Inheritance Tax and assume that private residences are exempt from Inheritance Tax.000 on 1 January 2008.000 at 40% 7.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S EXAMPLE Mr Alton has an estate of £450.000 at nil £19.000 Inheritance Tax: £325. £ Cumulative total brought forward (after annual exemptions) Estate Less BPR 450.000 344. Relief is usually given at 100% of the agricultural value. farm buildings. He dies on 1 January 2010 having made a potentially exempt transfer of £50. This is not usually the case. agricultural property relief (APR) nevertheless deserves a mention. The agricultural value is not necessarily the value of the land. including buildings used in connection with the rearing of livestock or ﬁsh. provided that the transferor occupied the property for the two years prior to the transfer.000. but it applies to agricultural land or pasture. or owned it for seven years while it was in agricultural use.000) 300. stud farms and shares in a farming company.000 £ Agricultural property relief Less common than business property relief.600 44. However.
Inheritance Tax may be payable in two countries – for example. This includes bank accounts in the UK. if an individual is domiciled elsewhere but has property in the UK.000. Additionally. To avoid this situation. and even if they do not in a particular case. It may be more beneﬁcial to continue farming but enter into an arrangement with a subcontractor. an individual who has been UK-resident for at least 17 of the last 20 tax years ending with the year of transfer is also treated as UK-domiciled for Inheritance Tax purposes. shares registered in the UK and life policies payable in the UK. The same will apply if they rent the farm out and continue to live in the house. however. APR will be lost because it is no longer being used for agricultural purposes.8 I N H E R I TA N C E TA X minimise Inheritance Tax. however. A couple retiring abroad will ﬁnd that any transfers between them – even of UK property – will be exempt from Inheritance Tax but only to the extent of £55. In most cases. If they sell the land but continue to live in the house. An individual who is not UK-domiciled is liable to Inheritance Tax only on UK property. should wait until at least three tax years have passed since becoming non-resident. goes further than for Income Tax. The £55. double taxation agreements exist. Individuals domiciled in the UK are liable to Inheritance Tax on lifetime and death transfers of property situated anywhere in the world.000 limit on transfers to a non-domiciled spouse could create problems and opportunities. Individuals who have been domiciled in the UK at any time during the last three years before a transfer are treated for Inheritance Tax purposes as if they were domiciled at the time of transfer. transfers of property should be made either before they leave the UK or in the ﬁrst three years after A THOROGOOD SPECIAL BRIEFING 109 . Becoming non-domiciled will therefore not affect the Inheritance Tax treatment of these assets. The transfers will then fall outside the scope of UK Inheritance Tax – although they may be taxed in the new country of domicile. An individual becoming non-domiciled who wishes to transfer non-UK property. Domicile Domicile was deﬁned for Income Tax purposes in Chapter 4. a credit for the foreign tax may be allowed against the UK Inheritance Tax liability. The deﬁnition of domicile for Inheritance Tax purposes. In certain circumstances.
as legatees would otherwise be hit with both Capital Gains Tax and Inheritance Tax. when they will still both be treated as UK-domiciled for Inheritance Tax purposes. This is just as well. both taxes can be avoided. This rule is extended so that transfers made donatio mortis causa – in contemplation of death.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S they leave. lifetime transfers may be subject to both Capital Gains Tax (the disposal proceeds of a gift being treated as market value) and Inheritance Tax. transferred out of the UK and then sold. If the resultant chargeable gains fall below the annual exemption of £10. As outlined at Chapter 7. Transferred assets are not only exempt from Inheritance Tax but may also be exempt from Capital Gains Tax if only one spouse is non-domiciled. Interaction with Capital Gains Tax The death estate is not subject to Capital Gains Tax. The asset can be gifted from a UK-domiciled spouse to a non-domiciled spouse. this may create an Inheritance Tax charge. Legatees are deemed to have acquired the asset at its market value at the date of death. 110 A THOROGOOD SPECIAL BRIEFING . usually when the transferor is on the death-bed – are treated in the same way as death transfers. If the transferor subsequently dies within seven years. which is important for the future computation of Capital Gains Tax.100 for Capital Gains Tax. This is because individuals who are not domiciled in the UK are taxed only on gains on assets situated in the UK. whereby the chargeable gain at the time of the gift is deferred and rolled into the deemed cost to the donee. gifts of certain assets can qualify for holdover relief. Gains on assets situated overseas are taxed only if the proceeds are remitted to the UK. Unfortunately. this should not be a problem. The donee may reduce any chargeable gain on the subsequent sale of the asset by any Inheritance Tax attributable to the asset. By using the annual exemption and making only small gifts.
A Thorogood Special Brieﬁng Chapter 9 Trusts Interest in possession trusts Discretionary trusts Accumulation and maintenance trusts Charitable trusts Overseas trusts Business Property Relief and trusts Comparison of trusts .
TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S
Chapter 9 Trusts
An individual who wishes to give away ownership of assets, including money, but still control how those assets are used will often place them into a trust. If handled properly, a trust can be an effective means of reducing Inheritance Tax. Apart from certain tax advantages, trusts are attractive to wealthy families wishing to protect assets from large divorce settlements which deplete assets. It was reported in July 2006 that a family which has occupied an estate in North Wales over twenty generations since the ﬁfteenth century will be forced to sell the property following a £1.5 million divorce settlement. Alternatively, the individual to whom the family wishes to make gifts may not be good at handling money, and so the family wishes to retain control over that individual’s access to the money. Three conditions must be met when a trust is set up: there must be an intention to create a trust; the trust must own clearly-deﬁned property; and the beneﬁciaries must be clearly identiﬁed. The settlor is the person who gives the assets to the trust, the trustees are the legal owners of the trust’s assets, and the beneﬁciaries are those who may share the property and any income arising from it. This chapter focuses on the different types of trust available and the tax advantages and disadvantages of each.
Interest in possession trusts
Interest in possession trusts are also known as life interest or ﬁxed interest trusts. Property remains in the trust and the beneﬁciaries have the right to receive the income earned or to use the assets. At a future date, or once a future event has occurred, the assets are distributed to the persons who hold a reversionary interest. These are the remaindermen. For example, a man wishing to ensure that his wife is provided for if he predeceases her but wanting his assets to pass to his children on her subsequent death (which they might not if she were to re-marry) should set up an interest in possession trust.
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Interest in possession trusts are less ﬂexible than discretionary trusts and accumulation and maintenance trusts, and individuals wishing to give assets to children may ﬁnd an accumulation and maintenance trust more suitable. The popularity of interest in possession trusts has waned because the favourable Capital Gains Tax treatment was removed in 1998.
Before 22 March 2006, a gift to an interest in possession trust was a potentially exempt transfer and there was therefore no Inheritance Tax if the settlor survived for seven years (see Chapter 8). From 22 March 2006, gifts to an interest in possession trust are treated as chargeable lifetime transfers in the same way as transfers to a discretionary trust (see below). The ten-year charge which previously applied only to discretionary trusts (see below) will now apply also to interest in possession trusts. Trusts set up for children under 18 or for disabled persons are not affected, and transfers to such trusts will continue to be potentially exempt transfers, nor will there be a ten-year charge. For Capital Gains Tax purposes, the usual rules for gifts apply: broadly, gifts are subject to Capital Gains Tax as if they were a transfer at market value, but holdover relief may be available (see Chapter 7). Gifts of money are never subject to Capital Gains Tax, nor are transfers of property which has been the principal private residence throughout its ownership, nor transfers on death. Any income is due to the beneﬁciaries, either being paid to them direct or to the trust ﬁrst. Income earned by the trust is taxed in the same way as Income Tax on an individual, except that there is no higher rate. So there is no extra tax on dividends and interest (which are received net of Income Tax), and any other income such as property rental income is taxed at the basic rate of 20%. Income paid out of the trust to beneﬁciaries is taxed on the beneﬁciaries at their normal rates. So dividends and interest are paid net and other income is paid with basic rate tax at 20% already deducted. Higher rate taxpayers will have an additional liability of 22.5% on the grossed-up dividends, and 20% on the grossed-up interest and grossed-up other income. There is a refund for nontaxpayers on interest and on other income, but not on dividends. When trust property is disposed of, a chargeable gain may arise. Until 1998, Capital Gains Tax was payable by interest in possession trusts at the basic rate, but this provided a useful loophole for higher rate taxpayers and the loophole was closed. Now, interest in possession trusts are liable to Capital Gains Tax in exactly the same way as other trusts.
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TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S
An annual exemption is available for Capital Gains Tax purposes and this is usually at half the amount applicable to an individual. So in 2009/10 it is £5,050. The annual exemption is reduced if the same settlor puts assets into more than one trust, in which case the annual exemption of £5,050 is divided by the number of such trusts subject to a maximum of ﬁve. Thus, if the settlor has made eight settlements, the annual exemption will still be £631. Any gains above the annual exemption are taxed at 18%. All of this is the same as for other types of trust. The question often arises as to whether assets should be transferred to the beneﬁciaries and holdover relief claimed. The beneﬁciaries may have unused annual exemptions or capital losses which would lead to more favourable Capital Gains Tax treatment. When the beneﬁciary dies or that beneﬁciary’s interest in possession comes to an end, the relevant share of the property will pass either to other beneﬁciaries or to the remainderman. The beneﬁciary thus makes a transfer which will be part of the death estate. If the event happens in the beneﬁciary’s lifetime, there is a potentially exempt transfer and also a disposal for Capital Gains Tax purposes, depending on the type of property involved. Occasionally the remainderman comes into possession of trust property but does not need it and wishes to pay it to another party – most commonly children. This disposal is exempt from Inheritance Tax and Capital Gains Tax.
Discretionary trusts are very ﬂexible. Income can be accumulated within the trust to be paid out at a later date, or it can be paid out at the discretion of the trustees. Usually there is more than one beneﬁciary, and beneﬁciaries need not have been born when the trust is set up – for example, the beneﬁciaries may simply be stated as children or grandchildren. The advantage of a discretionary trust is that the beneﬁciaries or their entitlements can be altered. For example, individuals wishing to provide for their children, who themselves currently have varying ﬁnancial circumstances, may want to give the trustees discretion to make payments to the children as they see ﬁt. The individual may specify that, on a certain date, the assets will pass to the beneﬁciaries, and the trust will then cease to exist.
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The assets transferred need not be business assets in order to qualify for holdover relief. the tax rate is the appropriate rate for the ten-year charge multiplied by 1/40 for each period of three months which has elapsed since the previous charge. There is also an exit charge on distributions out of a discretionary trust. and the band is used against income taxed at 20% ﬁrst. Discretionary trusts attract a ten-year charge. Income Tax rates on income received by the trust are punitive compared to interest in possession trusts and have become even more so since April 2004. All income falling within this band is taxed at the same rate as for interest in possession trusts. the rate will be lower and is calculated at 30% of the ‘effective Inheritance Tax rate’. Tax is charged on the value of the trust at a maximum of 6%. or when the trust ends. However. The annual exemption of £3. since 6 April 2005 there has been a basic rate band. There may be a Capital Gains Tax liability.000 since 2006/07.000 may also apply.5% for gross dividends. Broadly. with the tax rate again based on 1/40 for each complete quarter. In practice the rate will usually be the maximum only if the settlor at the date of settlement had already used the nil rate band in full by making other chargeable transfers in the previous seven years (the nil rate band used is the one which applies in the year of charge. A THOROGOOD SPECIAL BRIEFING 115 . and Inheritance Tax at 20% is payable if the total of such transfers in the past seven years exceeds the nil rate band (currently £325. which has been £1. not the year of settlement).000). then against interest and ﬁnally against dividends. If the distributions occur in the ﬁrst ten years. the calculation is broadly similar to that for the ﬁrst ten-year charge. If it has not. If distributions are planned around the ten-year mark. 40% for all other income). which is in many ways similar to the wealth tax imposed in some countries on individuals. though holdover relief may apply (see Chapter 7). This is charged on the tenth anniversary of the setting up of the trust and is repeated every ten years. advice should be taken as to whether to make the distributions before or after the ten-year charge falls due. This will vary according to circumstances. All income is liable to Income Tax at the higher rate (32.9 TRUSTS Tax treatment A transfer into a discretionary trust is a chargeable lifetime transfer as explained in Chapter 8. Distributions out of the trust in the last ten years are added to the total of other chargeable transfers in deciding whether the nil rate band has been breached. Previously it was taxed at 34%.
5% on dividend income. which has the beauty of simplicity. Accumulation and maintenance trusts Accumulation and maintenance trusts have the same characteristics as discretionary trusts but with the following restrictions: • At least one beneﬁciary must become entitled to the property. Beneﬁciaries of an interest in possession trust.000. will have trust property added to their estate when they die. the Income Tax rate will rise to 50% on income other than dividends. However. 116 A THOROGOOD SPECIAL BRIEFING . Interest in possession trust or discretionary trust? If there are elderly beneﬁciaries. Distributions out of a discretionary trust are paid net of Income Tax at 40%. or to an income from it. the higher Income Tax rates need also to be taken into account. This is because trust property will not be deemed part of their death estate. • There is a maximum trust life of 25 years unless all the beneﬁciaries are grandchildren of a common grandparent. on reaching the age of 25.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S From 2010/11. a discretionary trust may be the more suitable vehicle. and 42. education or another beneﬁt of the beneﬁciaries. This is in line with income for individuals with earnings above £150. The Inheritance Tax advantage on transfers to an interest in possession trust has been removed in most cases since 22 March 2006 (see above). The Capital Gains Tax position of discretionary trusts is exactly the same as for interest in possession trusts. by contrast. and taxpayers below the higher rate bracket can reclaim the excess Income Tax. • Income must be accumulated.000. except that it can be paid out for maintenance. The settlor of a trust can obtain holdover relief when he makes a transfer into the trust. • There must be at least one living beneﬁciary when the trust is created. A beneﬁciary receiving £600 is issued with a tax certiﬁcate for a gross amount of £1.
The settlor may therefore be tempted to put money into an accumulation and maintenance trust for the beneﬁt of children and have interest paid out to them. It follows that the only way to avoid a transfer being a chargeable lifetime transfer is to allow children control of assets at the age of 18. that share of the trust’s income is taxed as if it were an interest in possession trust. strictly speaking. The more favourable Inheritance Tax treatment was largely negated from 22 March 2006. which could be seen as irresponsible. and transfers to such trusts will continue to be potentially exempt transfers. except that if a beneﬁciary becomes entitled to income. which potentially saves up to £225 a year. There is also a ten-year charge. Charitable trusts Trusts which exist for charitable purposes only. discretionary trusts. the new rules catch trusts set up on or after 22 March 2006 from the outset. It is therefore better to leave it in the trust to accumulate. nor will there be a ten-year charge. A THOROGOOD SPECIAL BRIEFING 117 . As would be expected. trusts set up for children under 18 or for disabled persons are not affected. The tax advantage of paying a sum of money into an accumulation and maintenance trust rather than leaving it in one’s own bank account is not as great as it was since the trust rate was increased from 34% to 40%. religion. As for interest in possession trusts.9 TRUSTS Tax position Accumulation and maintenance trusts are. but the £1.000 basic rate band is now available. and they could consequently be deﬂected from their studies. however. any income of the trust exceeding £100 a year paid out to an unmarried child under the age of 18 is treated as if it were the settlor’s own income. Income Tax and Capital Gains Tax on accumulation and maintenance trusts are broadly the same as for discretionary trusts. education and other community purposes. and transfers to accumulation and maintenance trusts are now in most cases chargeable lifetime transfers in the same way as transfers to discretionary trusts (see above). Many families will be forced. As with interest in possession trusts. to make outright gifts when young persons are not of sufﬁcient maturity to handle the money. trust monies must not be used for private beneﬁt. can register with the Charity Commission as charitable trusts. in order to avoid Inheritance Tax. which include poverty. There is a ready-made scheme offered by the Charities Aid Foundation. as for discretionary trusts.
However.000. Overseas trusts If a trust is UK-resident. otherwise it is not resident. it is liable to Income Tax on its worldwide income. significantly reduce chargeable lifetime transfers and the ten-year charge. Business Property Relief and trusts As outlined above. If the settlor was resident. If some are resident and some are not. AIM shares are unquoted for the purposes of Inheritance Tax. the settlor was resident. as the trustees are then deemed to have disposed of the trust’s assets and immediately re-acquired them at market value. which means that to the extent that they exceed £325. ordinarily resident or domiciled in the UK at the time the settlement was made (or. ordinarily resident or UK-domiciled immediately before death).TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S The settlor is able to make payments into the Trust via the Gift Aid scheme (see Chapter 4). if applied with foresight. provided that they are not quoted 118 A THOROGOOD SPECIAL BRIEFING . the changes introduced from 22 March 2006 have the effect that transfers to most trusts are now chargeable lifetime transfers. There is an advantage in having an overseas trust because the trustees are then liable to Income Tax only on their UK income. they will attract Inheritance Tax at 20%. the trust is treated as resident for both Income Tax and Capital Gains Tax purposes. if the settlement was created on the settlor’s death. Business Property Relief (see Chapter 8) can. A word of warning – if a trust becomes non-resident. including most trading income (the exception being a trade which is not exercised in the course of carrying out a primary purpose of the charity) is exempt from Income Tax. If all of the trustees are either resident or non-resident. Residence status depends on the residence of the trustees. The ten-year charge now applies to most trusts. Many advisors are recommending that transfers into the trust are made in the form of shares listed on the Alternative Investment Market (AIM). the residence status of the trust depends on the status of the settlor. and gains are not subject to Capital Gains Tax if they are applied for charitable purposes. the trustees will be liable to immediate Capital Gains Tax if the trust ceases to be a charitable trust. the residence status of the trust follows this. Income. a Capital Gains Tax charge may arise.
9 TRUSTS on a recognised Stock Exchange elsewhere in the world. A THOROGOOD SPECIAL BRIEFING 119 . The shares must have been owned for two years prior to the transfer in order to qualify for the relief. and they therefore attract Business Property Relief at 100%. Agricultural Property Relief (see Chapter 8) can also be used to reduce the chargeable transfer and ten-year charge. Business Property Relief will be available and will reduce the amount of trust property subject to the charge. if AIM shares are held for at least two years prior to the ten-year charge. which is of course much less volatile. which may be a drawback in the case of volatile shares. Likewise. There is little point in saving tax at 20% if the value of the shares has fallen by more than that amount. Once the trusts have been set up. the shares can be sold and the converted into cash.
TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Comparison of trusts The following table compares the salient features of the three principal types of trust and their tax treatments.5% for dividends) Income Tax rates –status of payments to beneﬁciaries Capital Gains Tax on disposals of trust assets Paid net of tax at 10% or 20% Paid net of tax at 40% Paid net of tax at 40% Annual exemption applies Rate 40% Taper relief Annual exemption applies Rate 40% Taper relief No Inheritance Tax Annual exemption applies Rate 40% Taper relief No Inheritance Tax Death of beneﬁciary Property forms part of death estate for Inheritance Tax Yes with limited exceptions Ten-year charge Yes Yes with limited exceptions 120 A THOROGOOD SPECIAL BRIEFING .000 as for interest in possession If a beneﬁciary is entitled to income.000 as for interest in possession Otherwise 40% (32.5% for dividends) Income Tax rates on trust income First £1. Interest in possession Discretionary Accumulation & maintenance At least one beneﬁciary must receive property or income at age 25 Income must be accumulated except that it can be paid out for education and maintenance Beneﬁciaries’ right to receive income Yes At trustees’ discretion Inheritance Tax on settlement into trust Chargeable lifetime transfer with limited exceptions 10% dividends 20% savings 20% other income Chargeable lifetime transfer Chargeable lifetime transfer with limited exceptions First £1. that part is as for interest in possession Otherwise 40% (32.
A Thorogood Special Brieﬁng Chapter 10 Value Added Tax Registration Land and buildings Special schemes .
children’s clothing and construction of new residential or charitable buildings. In the case of the bookshop mentioned above. 122 A THOROGOOD SPECIAL BRIEFING . and in this case there would be a good argument for voluntary registration. which will often be enhanced by the existence of a VAT registration. and his prices would effectively rise by 15%. A ﬁnal advantage is the discipline which registration imposes on the business. education. Another advantage is the image of the business. Voluntary registration – for and against A business which is VAT-registered is able to recover its input tax to the extent that it makes taxable supplies. ﬁnance. computer equipment and maybe the rent it pays to its landlord. and a business making only exempt supplies cannot usually register for VAT. provided that they make at least some taxable supplies. Suppliers and customers may be less reticent in dealing with a business which is VAT-registered. most food. But a plumber might predominantly be carrying out work for private individuals. Businesses with customers who are not VAT-registered – whether these customers are individuals or small businesses – should think carefully before registering voluntarily. Exempt supplies include insurance. they would be in a position to reclaim the VAT which he charged. or an expected turnover of £68. Exempt supplies are not taxable supplies. it would make no difference because the supplies are zero-rated. must register for VAT. forcing it to keep its books up to date at least once a quarter. but may incur input tax on some of its costs. passenger transport. such as stationery. It would normally be in the interests of such a business to register for VAT in order to obtain a repayment of this input tax. postal services and many transactions in land (but see below). A bookshop makes zero-rated supplies. If all of his customers were themselves VAT-registered.000. for example. Taxable supplies include zero-rated supplies such as books.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Chapter 10 Value Added Tax Registration Businesses with an annual taxable turnover of over £68.000 in the next 30 days. Businesses below this threshold have the option of registering voluntarily.
the whole amount can be ignored.000. A business which submits late Returns or does not make timely VAT payments is liable to penalties whether it registered voluntarily or compulsorily. The total of the stock and computers is £8.000. EXAMPLE Garway Ltd is a VAT-registered retail outlet with an expected turnover in the next twelve months of £55.000 It estimates that in a week’s time.000. because the business will be liable for VAT on any tangible assets on hand at the date of deregistration.1 0 VA L U E A D D E D TA X Paperwork and penalties are also arguments against voluntary registration.000) in the next twelve months have the option of deregistering. The same considerations apply as for voluntary registration. If the output tax thus calculated falls below £1. machinery and ﬁxtures. for example when it has ceased to make taxable supplies. its stock will have fallen to £3.000 2. Deregistration In many cases a business has no choice but to deregister. The VAT could therefore be ignored. the total will be £5. Businesses who can satisfy Revenue & Customs that they will fall below the deregistration threshold (currently £66. However. It wishes to deregister and has assets on hand with the following VAT-inclusive market values: £ Stock Computers Machinery bought from a non-registered supplier 6. Should it delay its deregistration? The machinery is ignored because no VAT was reclaimed on purchase. The relevant assets are valued at market value and the business must account for output tax at 15%. on which the VAT would be £1.000. Assets on which the business incurred no input tax on purchase can be excluded.043 (using the VAT fraction of 3/23). A THOROGOOD SPECIAL BRIEFING 123 . including stock. in a week’s time.000 1.000. on which the VAT would be £652. Timing may be an issue.
So the landlord needs to consider not only who the current tenant is.000. There is a solution to this. but for one who is not registered. Businesses which own property and rent it out as a landlord face a different situation. in most cases. which would be £6. A landlord renting a property to a VAT-registered tenant but considering changing the use of the property to residential use in the future can safely opt to tax. even by selling and repurchasing the property. though in the case of property from which exempt supplies have previously been made. a landlord with taxable supplies of £600. The downside is that. A property with an option to tax will make no difference to a VAT-registered tenant. So a landlord will not charge VAT on the rent to the tenant. but also who may wish to rent the property in the future. The landlord is then able to recover any input tax on upkeep. A business making a mixture of taxable and exempt supplies is known as ‘partially exempt’ and its input tax recovery on general overheads is restricted to the percentage of its supplies which are taxable – for example. Rental – and. the rent will increase by 15%. which is done on a property by property basis. and input tax on general overheads of £10. Once this has been done.000. Options to tax are usually made internally and simply notiﬁed to Revenue & Customs. provided that its trade consists of making exclusively taxable supplies.000 and exempt supplies of £400. such as painting. If the landlord were to opt to tax more and more properties. could reclaim 60% of its input tax on general overheads. sale – of land and buildings is exempt from VAT. this percentage would rise and its input tax recovery would be greater. This is because the option to tax is disapplied if the building is used for residential purposes. be they rental or sales. Opting to tax can also have a beneﬁcial effect on the recovery of input tax on general overheads. 124 A THOROGOOD SPECIAL BRIEFING . The consequence of this is that any input tax incurred on upkeep. it is not possible to revoke it for 20 years. re-wiring and plumbing.000. re-rooﬁng. permission may be required. once an option to tax has been made.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Land and buildings A business which owns property for use in a trade will be able to reclaim all of the input tax it incurs on upkeep. The landlord may opt to tax the property. will be irrecoverable. the landlord must charge VAT on all future supplies from this property.
it is necessary to wait six months from the due date of payment before claiming bad debt relief. No VAT invoice must be produced on sale. and even goods which are eligible may be treated normally and VAT charged on the full sale price. Output tax is paid over only when cash has been received. Second-hand goods scheme By using the second-hand goods scheme.350. and those making a loss – will ﬁnd that cash accounting actually produces a cash ﬂow disadvantage. whose customers cannot generally reclaim the VAT they pay at the point of sale. A THOROGOOD SPECIAL BRIEFING 125 . it will for most businesses help with their cash ﬂow. when the dealer purchases the goods from a private individual or unregistered trader. A sale of goods qualiﬁes only if no VAT was charged when the goods were purchased. Likewise. With cash accounting. This signiﬁcantly reduces the VAT and is an attractive scheme for motor traders. input tax can be recovered only when the invoice has been settled. in which case there will have been no VAT. However. They should therefore not opt for it. The great advantage is that. Motor dealers will invariably have purchased second-hand vehicles from private individuals.000 per annum may join the cash accounting scheme. bad debt relief is automatic because the output tax is never paid over. he must make out and retain a purchase invoice with certain details speciﬁed by Revenue & Customs. Although in the long run this does not save any VAT. a business may opt to charge VAT only on its proﬁt margin if the sales meet certain criteria.1 0 VA L U E A D D E D TA X Special schemes Cash accounting A business with an expected taxable turnover below £1. with standard VAT accounting. The scheme is not compulsory. Businesses which usually receive VAT repayments when submitting their VAT Return – for example those making mainly zero-rated supplies including exports and sales of goods to other European Union countries.
of which £3.000. When the standard rate of VAT reverts to 17.500 Payable to Revenue & Customs: £67. it does not reclaim any input tax except on the purchase of capital items costing over £2. 8. The given percentage varies according to the type of business.000 will be recoverable under the normal rules. 4. the ﬂat rates will increase. and pays this over to Revenue & Customs. it is 11. She will incur input tax of £4.000) 4. Would this be of beneﬁt to her? £ Normal rules Output tax £50.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Flat rate scheme Businesses with an annual taxable turnover of up to £150. It simply applies a given percentage to its gross sales.500 (3.500 £ 126 A THOROGOOD SPECIAL BRIEFING . She is considering changing to the ﬂat-rate scheme and the relevant percentage would be 6. including exempt supplies. However.000 67.5% for computer consultancy.5% The ﬂat rate scheme would save VAT of £112 in the year.000 in the year ended 30 June 2010.5%.000 are eligible to join the ﬂat rate scheme.000 x 15% Input tax Payable to Revenue & Customs Flat rate scheme Standard-rated supplies (gross) Exempt supplies 57.000 plus VAT and exempt supplies of £10.5% for photography and 5.388 7. For example.5% for farming.500 x 6.000. The aim is to simplify VAT accounting.500 10. but businesses may ﬁnd that the scheme leaves them with cash in hand. EXAMPLE Miss Newland estimates that she will make standard-rated supplies of £50. Note that these are temporary rates which will apply until 31 December 2009. when it comes to complete its VAT Return.5% on 1 January 2010. The business charges VAT to its customers in the normal way.
advice should be taken before making the decision. A THOROGOOD SPECIAL BRIEFING 127 . As in all areas covered in these ten chapters.1 0 VA L U E A D D E D TA X The scheme cannot be used alongside the cash accounting or second-hand goods schemes. Not all small businesses would beneﬁt from the scheme. Whether it will be worthwhile will depend on the relevant percentage for this type of business and the relative values of outputs and inputs.
A Thorogood Special Brieﬁng Appendix Income Tax – personal and married couple’s allowances Income Tax – rates and bands Gift Aid – limit on beneﬁt received by donor Cash equivalent of company car Corporation Tax – rates and bands Capital Gains Tax – annual exemption Capital Gains Tax – taper relief Inheritance Tax – nil rate band .
475 9.030 2009/10 £ 6. In the 2009/10 tax year all married couple’s allowance claimants in this category will become 75 or over at some point during the year and will therefore be entitled to claim the higher amount of the allowance – for those aged 75 or over.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Appendix Income Tax – personal and married couple’s allowances 2008/09 £ Personal allowance Personal allowance for people aged 65-74 (1) Personal allowance for people aged 75 and over (1) Married couple’s allowance (born before 6th April 1935 but aged under 75) (1) (2) (3) Married couple’s allowance where one spouse is 75 or over (1) (2) Income limit for age-related allowances Minimum married couple’s allowance 6.535 Not applicable 6.180 9.540 2.640 6. 2) 3) Tax relief for the married couple’s allowance is given at the rate of 10%.965 21. 130 A THOROGOOD SPECIAL BRIEFING . They will never be less than the basic personal allowance or minimum amount of married couple’s allowance.900 2.035 9.625 6.490 9.800 22.670 1) These allowances reduce where the income is above the income limit by £1 for every £2 of income above the limit.
Gift Aid – limit on beneﬁt received by donor Amount of gift £ Up to £100 £100 to £1.440 0 – 37.5% of gift.000 Limit on beneﬁt £ 25% of gift £25 2.400 Over 37.800 2009/10 £ 0 – 2.APPENDIX Income Tax – rates and bands 2008/09 £ Starting rate for savings 10% Basic rate 20% Higher rate 40% 0 – 2.320 0 – 34.400 There is a 10% starting rate for savings income only.800 Over 34. maximum £250 A THOROGOOD SPECIAL BRIEFING 131 .000 Over £1. If non-savings income is above this limit then the 10% starting rate for savings will not apply.
TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Cash equivalent of company car 2008/09 and 2009/10 CO2 emissions (g/km) (rounded down) Up to 120 121 to 135 140 145 150 155 160 165 170 175 180 185 190 195 200 205 210 215 220 225 230 235 and over Petrol % of list price 10 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 13 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 35 35 35 Diesel 132 A THOROGOOD SPECIAL BRIEFING .
001 or more Capital Gains Tax – annual exemption 2008/09 £ Individuals Trustees 9.000 £300.100 9.800 2009/10 £ 10.500.001 – £1.APPENDIX Corporation Tax – rates and bands Rate Year starting 1 April 2008 £0 – £300.500.001 or more £1.500.500.600 4.001 – £1.000 Year starting 1 April 2009 £0 – £300.000 Small companies rate 21% Marginal relief £300.000 Marginal relief fraction 7/400 7/400 Full rate 28% £1.600 A THOROGOOD SPECIAL BRIEFING 133 .
Inheritance Tax – nil rate band 2008/09 2009/10 £312.TA X P L A N N I N G F O R B U S I N E S S E S A N D T H E I R O W N E R S Capital Gains Tax – taper relief Number of complete years Business assets % of gain chargeable Disposal from 5 April 2002 1 2 3 4 5 6 7 8 9 10 50 25 25 25 25 25 25 25 25 25 Non-business assets % of gain chargeable Disposal from 5 April 1998 100 100 95 90 85 80 75 70 65 60 For non-business assets owned on 17 March 1998. the period of ownership is increased by one year (the ‘bonus year’).000 134 A THOROGOOD SPECIAL BRIEFING . Taper relief applies to disposals by individuals and trusts from 6 April 1998 to 5 April 2008.000 £325.
namely agency and distribution and licensing. concentrating speciﬁcally on its use by organisations who are not required to adopt it. such as listed PLCs. Rebecca ISBN: 978-185418286-9 £95 This report is a clear. resolving disputes (including alternative methods. such as mediation). it is a must for all those who need to draft commercial contracts. David ISBN: 978-185418354-5 £85 The FOI Act gives companies and individuals important powers to request information from public bodies. competition law. opportunity.. For full details of any title. . Commercial Litigation: Damages and other remedies for breach of contract Ribeiro. Robert ISBN: 978-185418271-5 £169 Email: Legal issues 2008 Singleton. this report includes accounts of all the most recent important cases and highlights signiﬁcant changes in the way that the courts now assess damages.uk A major report on recent changes to the law and their commercial implications and possibilities. and to view sample extracts. With short case studies to illustrate legal requirements.co. Completely updated. The report explains the principles and techniques of successful international negotiation and provides a valuable insight into the commercial points to be considered as a result of the laws relating to: pre-contract. Are you equipped to take advantage and to protect yourself? International Commercial Agreements Attree. a new emphasis on claims for damages such as loss of business. accessible and jargon-free analysis of the practical application of Corporate Governance. Robert ISBN: 978-185418397-2 £169 A great deal has changed in the last few years. chance.Other specially commissioned reports from Thorogood BUSINESS AND COMMERCIAL LAW Commercial Contracts: Drafting techniques and precedents Ribeiro. Freedom of Information Act in Practice 2008 Singleton. With up-to-the-minute information on key cases and materials and in-depth analysis of the important drafting issues. private international law. Susan ISBN: 978-185418630-0 NEW EDITION £125 This report takes you through the drafting process giving practical guidance from start to ﬁnish. Susan ISBN: 978-185418632-4 NEW EDITION £125 Corporate Governance Martin. It also examines in more detail certain speciﬁc international commercial agreements. drafting common clauses and contracting electronically. the author guides the reader through all aspects of the Corporate Governance programme. please visit: www.. use and data and recent landmark cases have altered the ground-rules. What are the chances of either you or your employees breaking the law? This report explains clearly: • How to establish a sensible policy and whether or not you are entitled to insist on it as binding • The degree to which you may lawfully monitor your employees’ e-mail and Internet use • The implications of the Regulation of Investigatory Powers Act 2000 and the Electronic Communications Act 2000 • How the Data Protection Act 1998 affects the degree to which you can monitor your staff • What you need to watch for in the Human Rights Act 1998 and TUC guidelines.thorogoodpublishing.
Lorna ISBN: 978-185418054-4 £159 Negotiating the fault-line between private practice and in-house employment can be tricky. What is necessary to protect rights from erosion or loss. quality standards. Oxon OX14 4YN Web: www. It is a practical guide to the use of business excellence models and frameworks. The Commercial Exploitation of Intellectual Property Rights by Licensing DesForges. directives and regulations mean in practice and what you need to do to stay within the law. self-assessment programmes and the latest performance improvement initiatives. describing the nature of the right itself and explaining: How rights arise or can be obtained.orders@marston. Each chapter can be read on its own for convenient reference. and the introduction to each chapter also makes it clear where awareness of another section may be useful. This valuable report explains what all the new legislation.co. Insights into successfully managing the in-house legal function discusses these and other issues. Caroline ISBN: 978-185418367-5 £80 This valuable report identiﬁes all the areas critical to developing an effective performance improvement process. Dennis ISBN: 978-185418018-6 £95 Waste Management: The changing legislative climate Hand. central and local government and householders. this report is a thorough explanation of the law combined with expert guidance on negotiating and drafting the best contract for your client. Colin & Hopper. and ﬁnally the techniques of successfully managing a license operation. PO Box 269 Abingdon. Susan ISBN: 978-185418331-6 £95 This report will show you – whether as licensor or licensee – how to identify and secure proﬁtable opportunities. Achieving Business Excellence. How rights can be exploited.uk Telephone: +44 (0)1235 465 500 Fax: +44 (0)1235 465 556 Please see order form at the back of this report Post: Marston Book Services.thorogoodpublishing. under either civil (enforced by the owner) or criminal (enforced by public authorities) law. Charles ISBN: 978-185418285-2 £95 Websites and the Law Singleton.co. once infringement has been proved. Quality and Performance Improvement Chapman. Barry ISBN: 978-185418174-9 £95 Intellectual Property Protection and Enforcement Brazell.Insights into Successfully Managing the In-house Legal Function O’Meara. What remedies are available to the owner of the right. Incorporating the latest developments in IP law. Software Contract Agreements Bond. benchmarking tools. HOW TO ORDER Email: direct.uk . as the scope for conﬂicts of interests is greatly increased. Robert ISBN: 978-185418146-6 £80 Fully up-to-date with all changes to the law. this report reviews each of the principal forms of intellectual property right available in the United Kingdom. Recent far-reaching changes to the law and practice affect everyone – commerce and industry. What actions will constitute infringement of a right. Is your company/client website legal? Do you know what information you are required by law to put on it? What can you do with people’s personal data sent to your website? This report deals with all the practical legal issues which arise with websites – both those sites which sell goods or services and those which advertise. strategies and techniques for negotiating the best agreement.
please visit: www.co. There is a commitment within the high political echelon of the MoD to make this change happen. Chris ISBN: 978-185418230-2 £99 Understanding SMART Procurement in the MOD Boyce. Tim ISBN: 978-185418164-0 £69 An expert but jargon-free guide to enable you to manage the knowledge in your organisation successfully and to identify. As Tim Boyce writes in the Introduction. This report aims to draw out the main principles. Probably the greatest single challenge is to ensure that this commitment is maintained through the inevitable changes of personality at the political and senior management level. its impact on the organisation as a whole and on the IT group speciﬁcally. Tim ISBN: 978-185418276-0 £95 This specially commissioned report sets out what the latest legislation says and what it means. What does this ‘huge shift in thinking’ mean for contractors? How exactly has the role of MoD purchasing changed? This report covers every aspect of competitive tendering. Spending money on projects automatically necessitates an effective appraisal system – a way of deciding whether the correct decisions on investment have been made. ‘it is important to realise that the SPI embraces a conceptual shift in the role of the MoD procurers’. The single most encouraging and exciting feature of the SMART procurement initiative is that it embraces the need to change the culture. Project Risk Management: The commercial dimension Boyce. Analyse your Business – A performance health check O’Connor. Its purpose is to put minor issues into perspective and discourage the use of quick ﬁx solutions for bigger problems. Practical Techniques for Effective Project Investment Appraisal Tifﬁn. processes and procedures involved in tendering and negotiating MoD contracts. Sue & Harman. There can be few people who combine Tim Boyce’s experience and expertise with a gift for explaining issues and procedures with such clarity. Tim ISBN: 978-185418257-9 £95 For full details of any title. Ralph ISBN: 978-185418099-5 £99 How to ensure you have a reliable system in place. and how to implement an effective IT governance initiative in your company. Carol ISBN: 978-185418170-1 £89 This brieﬁng offers the tools and techniques for company-wide analysis and is essential reading for business leaders responsible for corporate performance. IT Governance Norfolk. David ISBN: 978-185418371-2 £95 Tendering & Negotiating MoD Contracts Boyce. gather and use that knowledge to maximum advantage. . The main thrust of this report is on issues to do with strategy. negotiation and contractual negotiations in this new era.uk This report will show you how to fully appreciate all the commercial dimensions of important projects and understand how to identify all the risks during the pre-contract bidding phase.thorogoodpublishing. organisation and processes. and to view sample extracts.BUSINESS STRATEGY AND MANAGEMENT A Practical Guide to Knowledge Management Brelade.
Strategy Implementation Through Project Management
Grundy, Tony ISBN: 978-185418250-0 £99
Surviving a Corporate Crisis: 100 things you need to know
Batchelor, Paul ISBN: 978-185418208-1 £80
The gap: Far too few managers know how to apply project management techniques to their strategic planning. The result is often strategy that is poorly thought out and executed. The answer: Strategic project management is a new and powerful process designed to manage complex projects by combining traditional business analysis with project management techniques.
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Technical Aspects of Business Leases: Overcoming the practical difﬁculties
Dowden, Malcolm £95
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The purpose of this report is to highlight areas where technical issues might lead to practical difﬁculties, and to give clear guidance to help those involved in property management avoid the pitfalls.
FINANCE Tax Planning for Businesses and their Owners
Hughes, Peter ISBN: 978-185418334-7 £95
Trade Secrets of Business Acquisitons
Pearson, Barrie ISBN: 978-185418366-8 £145
Written for business owners and managers, this special brieﬁng offers expert advice on the tax implications of your business decisions – guiding you in making the right business and personal choices for tax reduction.
Trade Secrets of Business Disposals
Pearson, Barrie ISBN: 978-185418321-7 £145
In this invaluable new brieﬁng one of the City’s most successful deal-makers distils 40 years’ experience as both principal and advisor. “Losing a deal by adopting the wrong tactics is unforgiveable” he writes, but it happens all too often. This brieﬁng offers both professional advisors and principals the opportunity to transform their rate of success, clarifying hard truths and highlighting avoidable mistakes. It is laced throughout with proven tactical advice to ensure that both deals and post-acquisition management are carried out with maximum success.
If you’re like most people, you’ll only get one chance to sell your business and to capitalise on years of hard work and planning. You can either ﬂuff it, or make sure you get the best possible advisor and become ﬁnancially secure for life, and possibly very rich. This report shows you how to make your business ‘investor-ready’ for maximum capital return.
VAT Liability and the Implications of Commercial Property Transactions
Buss, Tim ISBN: 978-185418307-1 £149
The option to tax is a major VAT planning tool but you have got to get the detail right to take full advantage – and getting it wrong can be very costly. This report shows you how to plan for maximum advantage and avoid costly mistakes.
EMPLOYMENT LAW Data Protection Law for Employers 2008
Singleton, Susan ISBN: 978-185418626-3
THE THOROGOOD PROMISE If you are not totally satisﬁed and you return a publication in mint condition within 14 days of receipt, we will refund the cost of the publication, no questions asked.
The four-part Code of Practice under the Data Protection Act 1998 on employment and data protection places a further burden of responsibility on employers and their advisers. The Data Protection Act also applies to manual data, not just computer data, and a tough enforcement policy was announced in October 2002.
Employee Sickness and Fitness for Work: Successfully dealing with the legal system
Howard, Gillian £95
Discrimination Law and Employment Issues
Martin, David ISBN: 978-185418339-2 £55
The Age Discrimination Act is billed by lawyers as the most signiﬁcant change in employment law since the 1970’s. In addition to sex and race discrimination laws, in the last two years employers have also had to cope with sexual orientation discrimination and religious discrimination. David Martin, an expert on employment law and practice, analyses the practical aspects of dealing with each of the anti-discrimination laws. He demonstrates how to ensure that paperwork and systems comply totally with the law, and he provides a range of helpful case studies to illustrate the key issues and bring them to life.
Many executives see employment law as an obstacle course or, even worse, an opponent – but it can contribute positively to keeping employees ﬁt and productive. This report will show you how to get the best out of your employees, from recruitment to retirement, while protecting yourself and your ﬁrm to the full.
Employment Law Aspects of Mergers and Acquisitions: A practical guide
Ryley, Michael ISBN: 978-185418363-7 £95
Effective Recruitment: A practical guide to staying within the law
Leighton, Patricia & Proctor, Giles ISBN: 978-185418303-3 £85
This Report will help you to understand the key practical and legal issues, achieve consensus and involvement at all levels, understand and implement TUPE regulations and identify the documentation that needs to be drafted or reviewed within the context of a merger, acquisition or disposal.
The ways to undertake the task continue to grow, making the decision as to how best to recruit for a given employment situation more complex. This specialist text is responding to a number of imperatives, including legal ones. There have been, and are, anticipated changes that make it essential that recruitment practitioners act both effectively and within the law.
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Navigating Health and Safety Law: Ensuring compliance and minimising risk
Pope, Chris ISBN: 978-185418353-8 £95
Successfully Defending Employment Tribunal Cases
Hunt, Dennis ISBN: 978-185418267-8 £95
If you have already been challenged by the insurer, inspector, or one of your workforce about the status of your health and safety this report will give you a workable answer to questions like Is my health and safety policy legally compliant? How do I avoid being liable for an employees ill health arising from previous employment? Who should carry out safety inspections – is it my responsibility?
Sweeping changes to the way employment tribunal claims are dealt with have increased the risk of higher costs and more expensive claims. This indispensable report covers all the changes and their implications for HR professionals.
HR, RECRUITMENT AND TRAINING Applying the Employment Act 2002: Crucial developments for employers and employees
Williams, Audrey ISBN: 978-185418253-1 £95
Enabling Beyond Empowerment
Williams, Michael ISBN: 978-185418084-1 £95
The Act represents a major shift in the commercial environment, with far-reaching changes for employers and employees. The consequences of getting it wrong, for both employer and employee, will be considerable – ﬁnancial and otherwise. The Act affects nearly every aspect of the workplace.
By applying the range of practical management techniques detailed in this report, you can provide the authority and means to empower in a way that substantially reduces the dangers.
Williams, Audrey ISBN: 978-185418306-4 £95
Dismissal and Grievance Procedures
Hunt, Dennis ISBN: 978-185418376-7 £95
This report explains what all the regulations say and what steps you need to take to operate effective dismissal, disciplinary and grievance procedures. It covers all the requirements of the Disputes Resolution Procedures that came into effect in October 2004. It tells you where and when the regulations apply – and what you need to do.
Recent research shows that far too many individuals, as well as ﬁrms, are unaware of ﬂexible working rights. How employers and employees deal with them is of crucial – and increasing – importance to both. This report clariﬁes the law, sets out the rights of employer and employee, and offers valuable practical advice on best practice.
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In these organisations. achieve consensus and involvement at all levels. property. Why do so many mergers and acquisitions end in tears and reduced shareholder value? This report will help you to understand the key practical and legal issues.uk . For full details of any title. James ISBN: 978-185418149-7 £95 There is growing evidence that the organisations that ‘get it right’ reap dividends in corporate energy and enhanced performance. Tony ISBN: 978-185418183-1 £85 New ways of working examines the nature of the work done in an organisation and seeks to optimise the working practices and the whole context in which the work takes place. community and environment.THE THOROGOOD PROMISE If you are not totally satisﬁed and you return a publication in mint condition within 14 days of receipt. Mark ISBN: 978-185418008-7 £95 The Employment Act 2002 has raised the stakes. can improve the performance of organisations. internal communications have equal status with the external communications functions. and to view sample extracts. Imperfect understanding of the law and poor drafting will now be very costly. no questions asked. please visit: www. we will refund the cost of the publication. understand and implement TUPE regulations and identify the documentation that needs to be drafted or reviewed. This report will: • Ensure that you have a total grip on what should be in a contract and what should not • Explain step by step how to achieve changes in the contract of employment without causing problems • Enable you to protect clients’ sensitive business information • Enhance your understanding of potential conﬂict areas and your ability to manage disputes effectively. Annelise. it spans the concerns of people. It is more about promoting the best ways of doing things than simple cost driven change. Tom & Rome. taken in their widest sense. technology. Although it emphasises the importance of business and organisation. Stephen ISBN: 978-185418169-5 £99 How to Turn your HR Strategy into Reality Grundy. This practical report will show you how internal communications. From a diagnosis of HR issues to an analysis of the external and internal future environment of your company and the effect on your human resources – this is practical information aimed at HR and senior line managers. Reviewing and Changing Contracts of Employment Phillips. Paula £95 ISBN: 978-185418296-8 Mergers and Acquisitions: Confronting the organisation and people issues Thomas. Player. New Ways of Working Jupp. He or she will then halt the downward spiral of diffusing stress and produce a more positive knock-on effect – namely to increase the productivity of the entire workforce and reduce absenteeism resulting from this terrible illness. The HR manager can learn how to deal creatively with stress from the information in this brieﬁng and pass on their knowledge down the ranks. Power Over Stress at Work Araoz. Daniel ISBN: 978-185418176-3 £99 Internal Communications Farrant.co.thorogoodpublishing.
Chris ISBN: 978-185418192-3 £99 Insights into Understanding the Financial Media: An insider’s view Scott. but it isn’t. Sounds simple. Ian and Saunders. ‘Buildings can be rebuilt. people can be recruited. This expert report explains the knowledge and techniques required. Simon ISBN: 978-185418083-4 £99 Supporting good causes is big business – and good business. The best lobbying is always based on accurate. Simon ISBN: 978-185418251-7 £99 This brieﬁng will help you understand the way the ﬁnancial print and broadcast media works in the UK. . we will refund the cost of the publication. lecturer and author on marketing. does not want published’ William Randolph Hearst When a major crisis does suddenly break. Norman Hart was an international consultant. and delivered to the right audiences in the right tone of voice at the right time. It will also provide you with techniques and guidelines on how to communicate with the ﬁnancial media in the most effective way. Tony ISBN: 978-185418326-2 £95 Transforming HR Hunter. so there is inevitably an element of judgement in what line to take. Norman ISBN: 978-185418120-6 £99 Lobbying is an art form rather than a science. to help you achieve accurate and positive coverage of your organisation and its operations. MARKETING. and is a very fast growing area of PR and marketing. founded on credible evidence. IT systems replaced. how ready will you be to defend your reputation? Lobbying and the Media: Working with politicians and journalists Burrell. business and colleagues. His books included The CIM Marketing Dictionary.Trade Secrets of Using e-Learning in Training Bray. Michael ISBN: 978-185418240-1 £99 Implementing an Integrated Marketing Communications Strategy Hart. The blue-print for the future of HR – how to deliver proven value to your Board. Corporate community investment (CCI) is the general term for companies’ support of good causes. Strategic Public Relations. this report is practical and jargon-free – giving you step-by-step skills and processes to enable you to design effective e-learning products with conﬁdence. but a reputation lost can never be regained…The media will publish a story – you may as well ensure it is your story’ Simon Taylor. up-to-date information and on a wellargued case. advertising and public relations. Jane ISBN: 978-185418361-3 £95 Deﬁnitely not for ‘techies’. somewhere. The report is based on interviews with 60 HR leaders from across industry and public and not for proﬁt sectors. THE THOROGOOD PROMISE If you are not totally satisﬁed and you return a publication in mint condition within 14 days of receipt. ‘News is whatever someone. no questions asked. Defending your Reputation Taylor. The report covers HR outsourcing and shared services. PR AND SALES Corporate Community Investment Genasi. Get ahead and stay ahead of your competition through better integration of your marketing communications. The Practice of Advertising and Industrial Marketing Communications.
This report provides the techniques required for effective lobbying. Strategic planning is a fresh approach to PR. This is a much-needed report which addresses the unique concerns of professionals who wish to sell their services successfully and to feel comfortable doing so. Public Affairs Techniques for Business Wynne-Davies. This report will help you become more skillful. This report shows you how to: • Develop PR. They are not usually trained in selling. it is now a necessity. brands and relationship management as the vanguards of your corporate reputation • Strengthen your internal as well as external communications • Improve the effective management of your stakeholders This is very much a ‘how to’ report. Charles ISBN: 978-185418089-6 £95 Tips and techniques to aid you in a new approach to campaign planning. Susan ISBN: 978-185418272-2 £95 Strategic Customer Planning Melkman.co. John & Croft. and more successful in your tendering. you must make a convincing case.uk . It offers you practical guidance and advice on how to apply them with maximum effect for your next PR campaign. Understanding the system and the process in which it works is essential to lobbying effectively. Kim ISBN: 978-185418179-4 £99 Many professionals still feel awkward about really selling their professional services. For full details of any title. you will be able to compile a powerful customer plan that will work within your particular organisation for you. This in-depth brieﬁng will give you the tools and techniques you need to enjoy the opportunities offered by the regional and local media. Jeff ISBN: 978-185418235-7 £95 To win business. Today’s successful companies recognise that in order to survive and prosper a comprehensive and disciplined approach to public affairs is no longer just a useful asset. Strategic Planning in Public Relations Knights. WORLDCOM… who next? At a time when trust in corporations has plummeted to new depths. Mike ISBN: 978-185418019-3 £99 This report shows in practical terms how you can counter potential threats through a professionally structured and implemented public affairs campaign. and risk antagonising the people you most want to inﬂuence. This report provides valuable tips and techniques to improve your PR and campaign planning.thorogoodpublishing. knowing how to manage corporate reputation professionally and effectively has never been more crucial. After reading those parts that are relevant to your business. An approach that is fact-based and scientiﬁc. Kieran ISBN: 978-185418225-8 £99 Practical Techniques for Effective Lobbying Miller. uncontrolled and badly planned approaches will do more harm than good. Alan & Simmonds. Selling Skills for Professionals Tasso. please visit: www.Managing Corporate Reputation: The new currency Dalton. Ken ISBN: 978-185418388-0 £95 ENRON. Charts. clearly presenting the arguments for a campaign proposal backed with evidence. Successful Competitive Tendering Woodhams. checklists and diagrams throughout. Peter ISBN: 978-185418175-6 £95 Techniques for Ensuring PR Coverage in the Regional Media: An insider’s view Imeson. and to view sample extracts. Uncoordinated.
Colin & Hopper. Charles Brazell. Ralph Boyce. Robert Martin. Caroline Singleton. David Singleton. Chris O’Connor. 10-12 Rivington Street.thorogoodpublishing. Dennis DesForges. Malcolm Hughes.Order Form FIVE WAYS TO ORDER: Email: direct. Robert Chapman. Lorna Hand. Barry Bond. Carol Boyce. Peter Pearson. Tim Norfolk.uk Title Commercial Contracts: Drafting techniques and precedents Commercial Litigation: Damages and other remedies for breach of contract Corporate Governance Email: Legal issues Freedom of Information Act International Commercial Agreements Insights into Successfully Managing the In-house Legal Function Software Contract Agreements Achieving Business Excellence.orders@marston. Rebecca O’Meara.co.uk Tel: Fax: +44 (0)1235 465 500 +44 (0)1235 465 556 Post: Marston Book Services. no questions asked. Susan Singleton. Quality and Performance Improvement The Commercial Exploitation of Intellectual Property Rights by Licensing Intellectual Property Protection and Enforcement Waste Management: The changing legislative climate Websites and the Law A Practical Guide to Knowledge Management Analyse your Business – A performance health check Tendering & Negotiating MoD Contracts Understanding SMART Procurement in the MOD IT Governance Practical Techniques for Effective Project Investment Appraisal Project Risk Management: The commercial dimension Strategy Implementation Through Project Management Surviving a Corporate Crisis: 100 things you need to know Technical Aspects of Business Leases: Overcoming the practical difﬁculties Tax Planning for Businesses and their Owners Trade Secrets of Business Disposals ISBN Price Authors Ribeiro. Paul Dowden. Tony Batchelor.co. Barrie Qty 978-185418271-5 £169 978-185418397-2 £169 978-185418354-5 £85 978-185418256-0 £80 978-185418347-7 £95 978-185418286-9 £95 978-185418174-9 £95 978-185418146-6 £80 978-185418018-6 £95 978-185418285-2 £95 978-185418054-4 £159 978-185418367-5 £80 978-185418331-6 £80 978-185418230-2 £99 978-185418170-1 £89 978-185418276-0 £95 978-185418164-0 £69 978-185418371-2 £169 978-185418099-5 £99 978-185418257-9 £95 978-185418250-0 £99 978-185418208-1 £80 978-185418194-7 £95 978-185418334-7 £95 978-185418321-7 £145 THE THOROGOOD PROMISE If you are not totally satisﬁed and you return a publication in mint condition within 14 days of receipt. . Robert Ribeiro. Susan Attree. Sue & Harman. Tim Boyce. we will refund the cost of the publication. Susan Brelade. Tim Grundy. London EC2A 3DU Web: www. David Tifﬁn.
Chris Hunt. Dennis Williams. Chris Taylor. Paula Bray. Player. Giles Howard. Dennis Williams.uk . Jane Genasi. Norman Scott. Mark Jupp. Patricia & Proctor. John & Croft. and to view sample extracts. Simon Burrell. Michael Dalton.co. Michael Pope.Title Trade Secrets of Successfully Acquiring Unquoted Companies VAT Liability and the Implications of Commercial Property Transactions Data Protection Law for Employers Discrimination Law and Employment Issues Effective Recruitment: A practical guide to staying within the law Employee Sickness and Fitness for Work: Successfully dealing with the legal system Employment Law Aspects of Mergers and Acquisitions: A practical guide Navigating Health and Safety Law: Ensuring compliance and minimising risk Successfully Defending Employment Tribunal Cases Applying the Employment Act 2002: Crucial developments for employers and employees Dismissal and Grievance Procedures Enabling Beyond Empowerment Flexible Working How to Turn your HR Strategy into Reality Internal Communications Mergers and Acquisitions: Confronting the organisation and people issues New Ways of Working Power Over Stress at Work Reviewing and Changing Contracts of Employment ISBN Price Authors Pearson. Tony Farrant. Gillian Ryley. Tom & Rome. please visit: www. Daniel Phillips. Stephen Araoz. Simon Hart. Audrey Grundy. Barrie Buss. Tony Hunter. Audrey Hunt. Susan Qty 978-185418366-8 £145 978-185418307-1 £149 978-185418283-8 £80 978-185418339-2 £55 978-185418303-3 £85 978-185418281-4 £95 978-185418363-7 £95 978-185418353-8 £95 978-185418267-8 £95 978-185418253-1 £95 978-185418376-7 £95 978-185418084-1 £95 978-185418306-4 £95 978-185418183-1 £85 978-185418149-7 £95 978-185418008-7 £95 978-185418169-5 £99 978-185418176-3 £99 978-185418296-8 £95 Trade Secrets of Using e-Learning in Training Transforming HR Corporate Community Investment Defending your Reputation Implementing an Integrated Marketing Communications Strategy Insights into Understanding the Financial Media: An insider’s view Lobbying and the Media: Working with politicians and journalists Managing Corporate Reputation: The new currency 978-185418326-2 £95 978-185418361-3 £95 978-185418192-3 £99 978-185418251-7 £99 978-185418120-6 £99 978-185418083-4 £99 978-185418240-1 £99 978-185418272-2 £95 For full details of any title. Susan Martin. James Thomas. Annelise. David Leighton. Ian and Saunders. Michael Williams.thorogoodpublishing. Tim Singleton.
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