The other reason for looking at the company route is the ability to pay a low salary with no tax or National Insurance payable and take dividends. Added to this is the fact that employers pension payments can normally be higher that 100% of someones earnings and you have a much more tax affective way of getting cash out of the business.  As a director you can also control the timing of monies come out of the company into to your hands which is a lot  more difficult to do as a sole trader or partnership.  To look at methods of saving tax why not contact Wade Corporate.

There has been a recent court case ( 17th February 2010 – Fryer) which highlights the extra scrutiny that the HMRC are taking regarding the deferral of pension rights.  This was made on the basis of the IHT Act 1984 under the provision of an ‘omission to exercise a right’ which effectively was the decision not to draw the pension fund on the due date, this by default increased the value of the estate to the beneficiaries.

Cases like this are rare but with UK PLCs budget strings being tightened by the day it is important that you speak to a financial planner at Wade Corporate who can advise you and avoid such pitfalls.  The importance of advice has never been stronger ……… even when that advice is about ‘doing nothing’.

The department said there could be “an upsurge of scam emails” seeking to take advantage of errors in the tax calculations of 5.7 million people.

Fraudsters already target internet users by ‘phishing’ with scam emails purporting to come from HMRC that offer ‘tax rebates’ in exchange for bank details.

HMRC says it will not be contacting taxpayers affected by the blunder via email or telephone nor will it ask for bank details.

The first batch of 45,000 letters from HMRC are being sent out this week, telling recipients they owe more tax or are entitled to a rebate.

It is thought 4.3 million taxpayers have paid too much, but 1.4 million have underpaid and will receive demands for the money before Christmas. The average amount of tax owed is £1,428.

A spokesman for HMRC said “There could be an upsurge of scam emails in the light of the repayments we are making.”

VCT’s

These can be very attractive particularly as an alternative to pensions if you are likely to remain a higher rate tax payer in retirement.  Each tax year you can subscribe a maximum of £200,000 or as little as £10,000 with most schemes.  There is an immediate relief of 30% of the contribution and there is also no tax on any gains or dividends as long as the investment is held for five years.  The one thing to look at closely is where is the fund investing and what are the risks to your investment, there are now some schemes starting to offer some protection to capital but its important to discuss this with your planner at Wade Corporate.

EIS

One can invest up to £500,000 each tax year into an EIS and obtain 20% income tax relief.  Provided that you hold the investment for three years there is no tax on any gains and any losses can be offset against any other gains you may have.  It is also possible to carry back any investment to the previous tax year.  One other advantage is that after two years the investment is IHT free should you die.  Once again a discussion needs to take place with Wade Corporate about the type of risk you are prepared to take and how liquid you need your investments to be.  We have seem that sometimes these schemes are sold with the main reasons for taking them out as the tax savings but with the facts about risk and liquidity being ignored.

A second example is the case of main residence relief and second homes.  HMRC was recently involved in a case where a person brought a flat in 1999 to let out whilst living with his girlfriend in another property.  However in 2001 things in the relationship went a bit wrong and they decided to split.  So he moved into his buy to let.  After about nine months the relationship turned the corner and they got back together, sounds like a happy ending. Well in 2003 the flat was sold and he asked for the CGT relief on the last three years he had owned the property on the basis that at one stage it was his main residence.

With allowances this would have reduced the tax on profits to zero,but HMRC pointed to the fact that he had not told the council he was living there or had his post redirected and therefore they rejected his claim. So the message is clear take advice and plan ,as the months go by HMRC are in our opinion going to get more aggressive .

At Wade Corporate we have many ways of helping you reduce your tax and plan for your financial independence, get in touch and we can talk.

The recession has led to more of my customers paying late. I know I can charge statutory interest on amounts paid late but I am afraid that this will damage customer relations.

Are there any other ways of addressing the problem?

Answer:

New research shows that 80% of businesses are suffering the same problem – and it’s not just the big firms that are slow to pay – small and medium sized entities (SMEs) are equally to blame.  Late payment can be the result of chasing outstanding amounts regardless of the likelihood of actually being paid.  

So as a first step it makes sense to credit check both new and existing customers.  Once you have issued a bill, you should make sure you have in place a collection process that is operated consistently and firmly.  This will often be enough to significantly shorten payment times.  

You could also consider credit insurance. This can be stand-alone or attached to an invoice finance facility.

And to avoid running out of cash as the recovery gets under way, you could consider putting in place flexible funding to underpin growth.  This would reduce your reliance on customers paying promptly.