How can I Reduce my Capitals Gains Tax Bill?
When you sell something you make a profit on for example, if you sell your property, shares, personal possessions of more than £6000, or your business assets and they have increased in value you will have pay CGT on the gain. If you want to reduce your CGT bill and get the maximum financial benefit from your sales you can consider the following options: 1. UTILISE THE LOSSES Losses made in the previous 4 years can be offset against the gains made and therefore the CGT bill can be reduced. Therefore, when calculating your tax bill you can deduct capital losses from the capital gains and you will only have to pay CGT on the reduced amount. If you are selling business asset consider selling the poor performing assets when you are selling high performing assets to reduce the tax bill. 2. DON`T SELL THE SHARES ALL AT ONCE-MAXIMISE THE USE OF ANNUAL ALLOWANCES Each year an annual allowance is available to you. For the tax year 2020/21 this is £12 300. This means you can make a gain of up to this amount without giving any CGT. However, this annual allowance which is available each year cannot be carried forward. It would be wise to use this annual allowance each year by doing a bit of planning, Instead of selling shares all at once it will be wise if you can spread the sale of the shares over one or two tax years. In this way your gain can come within the annual allowance and you might save some money which you might be otherwise be paying in your taxes. 3. TRANSFER TO YOUR SPOUSE You can transfer the shares to your spouse by selling them or giving them as a gift without having to pay CGT on the transfer. 4. TAKE ADVANTAGE OF THE INVESTORS RELIEF Investor’s relief is available to you if you have invested in the ordinary shares of an unlisted company. Provided that you have held the shares for a minimum of 3 years you can pay a tax of 10 % on any gains made when you sell the shares. 5. INVESTING IN TAX EFFICIENT PROGRAMMES If you are ready to take the risk you take the risk by investing in EIS or Venture Capital Trusts. These provide funding to small companies. By investing in such companies you will be eligible to get CGT relief. There are other ways in which CGT bill can be reduced, if you are planning to sell your assets and need a financial expert advice, don’t hesitate to call Taxaccolega at 020 8127 0728. Our expert team will provide you with the most tax efficient advice or drop a message here and we will get in touch with you.
What do I need to do if I want to close my limited company
If you are thinking of closing your company you have to make sure that you are well aware of all the necessary steps that are required to close the company. This blog contains information that you will need if you want to close your limited company. You might be closing your business for the following reasons: Once you have decided to close your company, you have to consider whether your company is solvent or insolvent. If your company is solvent there are two option available to you: Informal strike off You have to make sure that you let everyone who have stake in the business know of your intentions. Pay all your outstanding bills. You should also make sure that you are on the same page with HMRC. To strike off the company, the director of the company needs to inform the Company’s house by filling in DS01 form. In this form the director will need to give information such as Company`s registration number, the details of the company`s directors and also provide a cheque of £10. After all the formalities by the company`s house You will have to wait for 3 months for your company to be struck off from the register. Due to coronavirus the removal from the register is paused till 10 Sep 2020. De Register from VAT If your business is VAT registered, make sure that you inform HMRC that you no longer want to continue your business and fill in the form to de register the VAT. A de registration date will be given to you by HMRC and till that date you will account for all the VAT. Fill in the Final VAT return up to this date and submit it to HMRC. Corporation Tax You must make sure that all your corporation tax bills are paid. Get you final accounts made and fill in the corporation tax return and submit it to HMRC and companies house. If you want help in preparing your final accounts contact Taxaccolega at 020 8127 0728. PAYE SCHEME If you are using PAYE scheme for your employees you must inform HMRC that you are not using this scheme any more. Make sure that you have paid all the wages to your employees. Distribution of the Profit All the profits are distributed to the shareholders as dividends. Members Voluntary Liquidation This process is carried by an insolvency practitioner. In this process of liquidation the assets are sold and distributed to the shareholders as capital and not as divided. These distributions are taxed as capital gains and not dividends. The tax implications that arise in each case will be discussed in the next blog. Other options available to you are making the company dormant if you think you would want to continue your business in the future. In the mean time you have to fill in tax returns as nil. If you working as a sole trader in the meantime don’t forget to fill in self-assessment tax return. If always better seeking professional advice as there is no one solution which fits everyone. We at Taxaccolega analyse each situation and advise accordingly. So you can close your limited company in most tax efficient way. Please do not hesitate to contact us at 020 8127 0728 or drop us a message by visiting https://www.taxaccolega.co.uk/contact-us we will be very happy to help you. We provide accounting services at very reasonable rates. You can have a look at our packages https://www.taxaccolega.co.uk/about-us/fees.
Business Asset Disposal Relief
Business Asset disposal relief which was previously known as entrepreneur`s relief is the relief given to individuals who are working as sole traders or partners and have owned the business for 2 years. If an individual who is fulfilling the above mentioned conditions, sells the business in the tax tear 2020/2021 and afterwards they will pay capital gains tax at a reduced rate of 10% on the first £ 1 million of the gains profit that they will make on selling the business. This life time allowance of entrepreneur’s relief has been slashed in the 2020 budget which was previously £10million. So if you have already used your £ 1 million allowance you won’t be able to claim relief. Do buy to let landlords qualify for entrepreneur relief? The answer is maybe not. This is because HMRC clearly mentions that to qualify for the entrepreneur’s relief the ‘business’ will include any trade or profession or vocation but it will not include the letting of the property unless it is holiday lettings unless it is furnished holiday lettings in UK or EEA. Can I claim the relief on the following assets? Assets Do they qualify for the relief? Conditions Selling all or part of the business yes You are a sole trader or a partnerYou owned the business for at least 2 years Shares or Securities Yes You are an employee of the companyThe company`s main activities are in trading Assets you lent to the business Yes You’ve sold at least 5% of your part of a business partnership or your shares in a personal companyYou owned the assets but let your business partnership or personal company use them for at least one year up to the date you sold your business or shares – or the date the business closedhttps://www.gov.uk/business-asset-disposal-relief How to calculate the relief? Suppose all your Gains qualify for the relief. The gain will be the difference between what you sold the assets for and how much you paid to buy it. (In some cases we will use the market value as well) Deduct the tax free allowance of £12300(for individuals and personal representatives) and £6150 for the trustees If you are a basic rate tax payer you will have to use your basic rat band first and pay 10 % on all the gains. Once calculated the gain we will look for the expenses which can be deducted such as SDLT or advertising expense. Other situations in which the CGT can be deffered is making use of rollover relief where the proceeds of a business is reinvested in new business assets or when the business assets are transferred to the spouse or a civil partner instead of being sold. How to claim the relief and what are the deadlines? The relief can be claimed in the self-assessment tax return in the ‘Capital Gains summary section’. The deadline is the 31 of January following the disposal. For example, if the disposal was made in Sep 2020 the last date to make the claim would be 31 Jan 2023 Selling of the business has complex tax implications, if you need an accountant to sort out this for you don’t hesitate to contact at for Taxaccolega based in Croydon and Southall 020 8127 0728 or email us at info@taxaccolega.co.uk for the reasonable packages.
Holdover Relief
I am selling my business to my friend will holdover relief apply to me? If you are eligible for gift holdover relief or not depends on all individual circumstances. If you are selling your business to your friend at zero consideration or any value which is less than the market value then the transaction will be considered as a disposal or a gift and you will be eligible for the relief. So yes, if you are selling your business to your friend the relief will apply to you. Holdover relief means that for example, if you sold your retail shop to your friend worth £200, 000. The worth of the shop at the time of the sale was £400,000. If the relief is not available the CGT liability would be based on the market value, if a claim is made there is no need to pay tax on the chargeable gain which is known as ‘held over gain’. However, at the time of the future disposal of the assets, the friends cost of the business which would be the market value of £ 200,000 will be reduced by the held over gain. Other Similar Disposals that qualify for the relief How to Claim: The claim will be made jointly with the person the gift was made. In this case the claim will be made by the friend and the person giving the gift. This is done by filling the form for the gift holdover relief and including it in the Self-assessment tax return. There can be some complex issues related to the selling of the business. We have an expert team at Taxaccolega, based in Croydon and Southall and we can help you with your taxes. Please feel free to contact Taxaccolega at info@taxaccolega.co.uk or call us at 020 8127 0728
I am selling my business – What are my Tax Liabilities and How do I maximize my profits?
When you are selling your business as a sole trader or a partner you will have to pay Capital Gains Tax on any profits that you make. On the other hand, you won’t be paying CGT. If you run your business as a limited company and you make a gain on its sale instead you pay corporation tax. In this blog we will discuss how you can make use of the reliefs available to you if you sell your sole trader or a partnership business to reduce your Capital Gains tax and therefore maximize your profits. What is Capital Gains Tax Capital Gains Tax is the tax on the profit when you sell something which has increased in value. You have to pay capital gains if you make a profit when you sell( or dispose of) all or part of the business. Annual Exempt Amount There is an annual exempt amount available which is £12 300 you won’t have to pay any taxes if your gain is within the annual exempt amount. You will be able to utilize the annual exempt amount most efficiently if you sell or dispose of your business in parts. What are the reliefs available to me if I am selling my business? There are certain eligibility criteria for each relief and if you are eligible you can get the relief depending on your circumstances and you can save on your taxes by or Let’s look at the following reliefs available to you and see if you are eligible and we accountants in Croydon Can help you claim them . Business Asset Disposal Relief: You can pay the reduced amount of CGT(10 %)instead of the normal rates if the following applies to you Gift Hold Over Relief: If you are just giving away your asset you won’t be paying any taxes on it. Instead CGT will be paid when the person you gave your asset sells it. You can claim this relief when you have used the business asset for business purposes as a sole trader or a partner. Delaying the Payment of Capital Gains Tax: You can claim incorporation Relief: You can delay the payment of CGT if you transfer all your business and its assets in return for the shares in a company. This is not actual selling, it is when you transfer your business to a company. How do I claim You do not have to claim incorporation relief you will get it automatically, Business Asset disposal Relief: You can claim this relief if you dispose of your assets and replace them with the new ones within 3 years of disposing of them. If you are planning to sell your business and you need more advice on how to go about it and how to submit the the tax returns, please feel free to contact Taxaccolega and our team of expert accountant will be happy to help you,
Mergers and Acquisitions
The impact of coronavirus is significant on the mergers and acquisition deals. As a result of the crisis everything is disrupted, the businesses are closing, there is an increase in the redundancies and there is an increase in the unemployment. Are we going to see any mergers and acquisitions in the near future? It is expected that there is going to be some mergers and acquisitions activity in the businesses such as leisure, travel and transport. As these are the industries which are significantly affected by the pandemic. These businesses might attract some merger and acquisition deals. The buyers might want to acquire such businesses at a bargain and restructure it. The businesses might be looking to merge so they can combine their strengths and gain a larger market share Before a business finalises the deal it is important that they also consider the some financial issues that arise in the mergers and acquisitions deal: What are the taxes that are paid in the merger and acquisitions: When ywo companies merge there is a complicated tax isues for example: There are certain capital gains tax rules which will be applied on the sellet side.
My business is making losses- Will I be better off if I incorporate my business?
Due to pandemic Covid-19, the businesses have faced financial difficulty globally. Since the easing of the lock down and when people are returning to work many businesses are looking for ways in which they can restructure their businesses to keep their businesses going. A client approached me who is running a retail shop as a sole trader. Recently, he has faced loss in the business. While he is looking for ways as how to utilise these losses to reduce the tax bill he can definitely consider incorporating his business. As a sole trader what can he do with the losses if he is doing his accounting on the accruals basis? Claim the loss in the same year: he can claim the loss same year, but if he has no tax to pay in that year there won’t be much benefit. However, if he has a salary or any other income as well from any and he is paying 20 % on the income he can claim the loss in the same year in order to reduce the taxable income. It should be noted however, that in a limited company the losses cannot be offset against any other income. Claiming loss in the final 12 months of trading: If a sole trader is suffering a loss in the last 12 months of trading they can use this loss and offset it against the profits made from the same trade in the last three years. Carry forward losses: he can carry the losses forward if you think there is no advantage in claiming the loss against the previous profits. If the sole trader decide to incorporate the business he will have the following advantages: When a business is incorporated you and the business become 2 separate legal entities. Investment: A company attracts more investment. For example, in case you are in a retail business and you want some financing to buy goods you will be able to raise money more easily. And you won`t be personally liable for all the debt. This means your company will be incur debt and if the company is not able to return the debt on time the personal assets cannot be seized. Tax: you can save on tax as well. For example, the sole trader will have to pay income tax on profits and NI Class 2 as well as NI Class 4. Limited companies will only pay corporation tax on profits and there is no national insurance to pay. However, in case of a limited company the director can withdraw money as salary and dividends which are subject to tax. And any other money withdrawn will be considered a loan which is taxed according to the rules under director loan account. You will need to use numbers to analyse which option would be better for you. If you want us to do advise you we can provide you will the necessary information and calculations so you can make an informed decision. We can also help you with setting up a limited company at please contact Taxaccolega at 020 8127 0728 or email us atinfo@taxaccolega.co.uk our expert help will be happy to help you.
Do I get any relief if I am a SME and am starting a new business due to covid?
There are many businesses who are planning to develop new products due to Covid-19 so they can remain competitive in the market. This is because the businesses are either facing a slump in the demand and therefore profitability. Many cash generating schemes are available to the SMEs, however all such businesses who are planning to develop and introduce new products in the market to remain competitive can claim R&D tax credit relief. It does not matter which sector you work in, if you are limited company and have carried qualifying research and development activities. To qualify who must have actually spent money on these qualifying R & D projects and you are able to prove it. What is R&D Relief? The Research and Development expenditure is increased to 13% from 1 April 2020. This mean that the companies can deduct 130% of their qualifying costs from their yearly profit in addition to the normal 100% to make a total of 230%. What costs can I claim? Following are some of the costs which you can claim under R&D relief. This will provide you with the funding and reduce your tax bill: Employee Costs: This will include Salary, NI contributions, and pension contributions of all those employees who are working directly with the project. If you have hired a subcontractor to work on the project you can claim 65% of the relevant costs. Materials: You can claim for the materials which you use for the project. Cost of land, Capital expenditure, the costs associated with the distribution of the product cannot be claimed under the relief. How to claim for the relief? You can claim the relief for upto 2 years after the end of the accounting period in which the project was started. Don’t forget to note the start and the end date of the project. You can claim for the relief in CT 600 with appropriate calculations Our expert team at Taxaccolega will make sure that your company`s R&D claims can deliver maximum value to you. Our tax specialist can work directly with your finance team so that you can carry out the business most efficiently. Please contact Taxaccolega at 020 8127 0728. If you have any queries please fill in this form https://www.taxaccolega.co.uk/contact-us
Is it a good idea to invest in BTL property?
If you have extra funds and you are looking for some investment you should definitely consider investing in the buy to let property. Buy to let property is the property which is bought with the intention to rent. Buy to let property can be bought on cash and other buy to let mortgages. Investing in BTL property would mean that you will get the monthly rent from the tenant and you can also make profit from the sale of the property when the property prices increase. According to Right move, after the lockdown, the demand in the rental property has increased. The demand is 22 percent more at this time than it was last year. What would be tax implications in buying the property for buy to let? If you are thinking of investing in BTL properties you will be dealing with the following taxes. If we understand the above taxes we can plan ahead and reduce the risks. We at Taxaccolega have an in house property expert team and we can help you advice on the above taxes so you can make a more informed decision. Some of the challenges that are faced by the BTL landlords: Mortgage tax Relief: Previously the interest payment on the mortgage could be deducted as an expense from the rental income thereby reducing the taxable income which in turn reduces the income on the rent. However, from April 2020 the mortgage interest cannot be deducted as an expense which can increase the tax paid on the rental income. Capital Gains Tax: You will have to pay capital gains tax when you decide to sell your Buy to let property, you should always consider this as a cost which will reduce your profits. We are advising our clients to purchase a Buy to let property through a limited company. If you are holding a property through a limited company you can reduce the tax bills as the companies can deduct the interest on the mortgage as an expense and therefore reduce the tax bills. If you renting a property through a limited company you will pay the corporation tax on the rental income which you receive, whereas if you are renting a property you will be paying tax on the income tax which is higher than the corporation tax. However, every situation is different and buying a property is a long term investment, you should be well aware of all the reliefs and options available to you in order to make maximum gain. If you need a professional advice, please do not hesitate to contact Taxaccolega at 020 8127 0728 and we can do all the calculations for you and help you make a decision based on real numbers.
Setting up a Charity – 6 things you need to know
How is my charity different from any incorporated company? The main difference between a charity and a corporate entity lies in its purpose . The Purpose The purpose of an incorporated entity is to make profit while the purpose of a charitable company is to benefit the public. This means it has charitable purposes and it the main objective of such an entity is not to make or maximize the profits. The charitable purposes as defined by gov include things that contribute to: Appointing a Trustee If you want to run a company you need to appoint the trustees. You will need at least 3 trustee to run the charity. They will use their skills, knowledge and the industry experience to run the charity. They will also play a major role when it comes to recruiting new senior staff. HMRC provides complete guidance on how to recruit trustee for the charity. The structure: You will have to chose a structure for your charity which will affect the way you will run the charity, who will run the charity and what the charity will do. You can chose from the 4 charity structures: These structures are briefly explained below: Charitable Company: The charitable company will have to be limited by guarantees rather than shares when you register. You will have to register the charitable company with the companies house. Trustees have limited or no liability for a charitable company’s debts or liabilities. Charitable Incorporated Organisation: A CIO is an incorporated structured design for charities. You need to register with Charity commission rather than companies house. Trustees have limited or no liability for CIO debts or liabilities. Charitable trust A charitable trust is a way a group of people who are actually the trustees to manage assets such as money, investments, land or building. Unincorporated Charitable Association This is the simplest way to run the charity. A group of people come together to run the charity for the common purpose. Unincorporated charitable associations cant employ staff or own premises. Income Once you have defined the purpose of your charity , and decided on the structure you need to register yourself with the company’s house. You will have to register yourself if it’s income is at least £5000 or if it’s a charitable incorporated organization. Whereas if you are planning to set up a limited company you have to register it irrespective of any income. Will I have to pay any taxes? If you are running a charity you will have to pay taxes if : How will my charity pay taxes? You will have to complete a company tax return if your charity is a You will also submit an annual return to the charity commission if the charity’s income is above £10 000. There are certain tax reliefs available. To find out more on the charity taxes and the tax reliefs available call Taxaccolega accountants in Croydon and our experienced accountants will be happy to help you.