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VAT on Property

Through our VAT on Property Service, we can help you to save and reclaim VAT on your property.

How can we help?

We can:

  • Ensure that you are paying the correct amount of VAT.
  • Assist you with reclaiming VAT that you have already paid from HMRC.
  • Explain the VAT implications of your plans, ensuring that you are making the most VAT efficient decisions for your property.
  • And more!

When might seeking assistance from us be beneficial for you?

The main areas where we may be able to provide valuable assistance and save you money are as follows:

Identifying the correct VAT treatment for your project – We will explain the VAT implications of your potential options so that you can make informed decisions about how to move the project forwards in the best way.
Building and conversion projects – We can help to identify if there is a qualifying conversion into a dwelling that may qualify for the reduced VAT rate of 5%.

Transfer of Going Concern (TOGC) – We can identify whether your transactions meets the TOGC conditions to be outside the scope of VAT, and how the transaction should be executed to ensure the most beneficial VAT treatment.

Opting to Tax (OTT) – We can identify whether opting to tax land and buildings (to allow you to recover VAT on expenses relating to the property) would be beneficial.

Change of intention – If you will no longer make taxable supplies from/of a property, you may face a clawback from HMRC of any input VAT on expenses relating to the property. We can help restructure your business to ensure favourable VAT treatment.

The VAT Self-Build Scheme – If you are planning to build your own new house or convert a non-residential building for yourself or your relative to live in, you may be able to reclaim VAT on specific construction costs.

Other related areas where we may be able to add value include:

  • Property ownership, acquisition, and incorporation (if appropriate).
  • Tax calculations on proposed sales of property and mitigation of SDLT

Why contact us?

We can review your specific circumstances and ensure that you are paying the right amount of VAT, claiming any applicable reliefs and fully understand the VAT implications of your plans, enabling you and your business achieve the best possible results.

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Sale of Business to Third Party

Selling your Company

If you’re selling your company, then the amount of tax you pay can make a significant difference to the money you have in your back pocket to spend or reinvest.

Mitigating and understanding your tax position is therefore vital and this article includes some areas where a difference can be made:-

 

Should you sell the Trade and Assets or the company?

This is an important first step in deciding and agreeing with the buyer what will be sold.

Quite often as a vendor you will prefer to sell the shares in the company as there is only one level of tax in doing so.

When you sell the trade and assets, there are two levels of tax to consider if you want the proceeds in your back pocket.  However, a trade and assets sale can sometimes be the only practical way of selling of you have other valuable assets in the company that you want to retain.

Tip – On occasion, it may be possible to demerge any assets you want to keep before selling the trading company

 

Will I Qualify for 10% Tax?

A 10% tax rate is available (on the first £1m of lifetime gains) if you sell shares in your company to someone else.

The 10% rate is available through Business Asset Disposal Relief (BADR).  To qualify :-

– you must have had at least 5% of the shares

-you must have been a director or employee; and

– the company must have been ‘trading’..

for at least the previous two years.

There are pitfalls waiting, so care is imperative here.

 

Complexity with Earn-Outs

This is where things could get tax tricky.

If an earnout is successful, then the potential range of tax payable is between 10% and 48.25%, which is a huge range.

If we structure the earnout with thought then you will have more chance of getting closer to the lower end of that range.  Every case is different and also of importance is establishing whether it is possible (and beneficial) to defer payment of tax on an earn-out right until any monies are received.

 

Loans in and out of the Company

If loans are owned by you to the company, then it should be possible for these to be settled in a tax effective way, if a strategy is agreed with the Buyer.

Other areas to consider are the tax warranties and tax indemnity that the Buyer may ask you to sign, especially if you are selling the company.  Sometimes these can be overly onerous and it can be helpful to have some to assist who understands the workings of tax therefore whether the warranty is necessary.

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Family Investment Companies

The term ‘Family Investment Company’ provides connotations of a special type of company.

Actually, it’s just a normal company which is owned by different family members with the purpose of investing (rather than a trade).

It can invest in anything which is legal, but typically that will be property (commercial, residential or holiday lets) and stocks, shares, and equity funds etc.

Tax Objectives 

Companies tend to be taxed at lower rates than individuals who have already used up their basic rate bands of income tax through their normal earnings.

That is why companies are utilised as vehicles for investment, because any investment gains/profits/interest are taxed at relatively low rates, meaning that there is more cash to reinvest (their investments roll-up quicker than individuals’).

Two further key tax points around FICS are:

  • Shares in a FIC will always be subject to IHT on death (which might not be the case for a trading company). Therefore, consideration around their shareholding is a vital part of the establishment and ongoing management of a FIC
  • Taking money out of the FIC for personal expenditure is likely to create further tax, so this needs to be managed

Shareholdings 

Shares in companies have three elements to their rights: –

  1. Voting Power
  2. Rights to dividends
  3. Rights to capital on a sale or winding up

Shares issued to individual family members can have have differing rights.  For example, a more senior member of the family may require voting rights (to provide the company with direction) but they may not need capital because they wish for the value in the equity to pass down to further generations.  Furthermore, if the shares in a senior family member do not have rights to capital then these shares have less value than full shares and so harbour a smaller IHT exposure.

So the conundrum here is to establish the shareholding of the company in a way that allows IHT mitigation but also the possibility of income.  It should also be borne in mind that an individual may be due a wage for services they provide to the company, and in such a case they may not need a right to dividend.

A key trap to avoid is capital gains tax.  If equity with material value is passed down the generations then this can create a CGT exposure.

Concluding Thoughts

Family Investment Companies often develop after money in a trading company is used to buy property and then the trade dies down or ceases.  In these cases, thought should be given as soon as possible to the shareholding structure and how equity / rights can be passed down to younger generations.

If a family decides to become involved with property investment for the long term, then a company often tends to be the most appropriate vehicle, with the company borrowing from the family members or a bank to make the acquisitions.  In such cases a detailed consideration of the shareholding and what interests can be held by younger generations will be important from the start.

Those involved with stock and shares could also use a FIC but because of the availability of pensions and ISAs their usage in such situations is less common.  If a portfolio already exists then resources could be lent to a FIC to start its investment activity but this will require careful consideration.

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Insertion of a Holding Company

Profits developed by a successful business are often reinvested into working capital to continue its growth.

Company owners may also make a decision to capitalise some profit for the longer term, by investing it in tangible fixed assets (plant & machinery property) or acquiring other businesses.  Acquiring capital assets of this nature may also help the business growth or it could be seen as a way of securing its base and increasing profitability in the mid to long term.

If material capital assets are acquired then they are valuable to the company and its shareholders and it is wise to be pro-active in protecting their ownership and value.

The use of a holding company is a relatively straight forward way of protecting a business’ fixed capital base.

Property, plant and machinery and ownership of other businesses can be distributed to a holding company from the existing trading company, so that creditors of the trade can never have a claim over those capital assets.

Tax Status

The transfer of fixed assets from Trade Co to Holding company can be carried out free from tax.

If a holding company is not already in place, then it should be possible to insert one without incurring any tax liabilities.  Although to insert the company free from tax it will be imperative to gain a clearance from HMRC before proceeding.

Consideration of other taxes such as VAT will be important and establishing the Holding Company with its own accounting system and bank account is often a good idea.

If you would like to understand the benefits and practicalities of utilising a holding company for asset protection please call and ask to speak to arrange an initial free consultation with Paul Davison

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Companies House Compliance

Our Accufile service takes the stress and hassle out of filing documents and statements with Companies House, allowing you to focus on your business.

Why choose the Accufile service?

Penalties for late filings have been introduced of up to £1500 for private companies and £7500 for public companies.

Officers of companies can also face prosecution if the company is operating but fails to make submissions to Companies House.

The Accufile service takes the hassle out of filing documents with Companies House – we will prepare and submit the relevant documents for you and keep track of upcoming deadlines, helping you and your business to avoid any late filing penalties.

PD Tax are experienced in providing Companies House compliance services to businesses.

What’s included:

  • Reminders of when accounts, confirmation statements and any other documents are due
  • Submission of your Confirmation Statement
  • Notification of Director/Secretary changes
  • Notification of a change of address of your registered office and of your company records
  • Notification of a change of company name
  • Notification of a return of an allotment of shares (excluding non-cash)
  • Recording dividends
  • And maintenance of the statutory books

Find out more today and call 0113 887 8432 or email laura.b@pd-tax.co.uk

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Tax Returns

Are YOU looking for a cost effective and seamless tax return service?

Do YOU want a tax EXPERT looking after your tax affairs?

Would YOU like comfort and clarity that your compliance obligations are met, and you will not receive any unexpected penalties.

All our clients’ tax returns are considered in detail by a Chartered Tax Adviser, yet our team is structured to prepare your tax return in an efficient and cost-effective manner.

For a LIMITED TIME we are offering 20% OFF* your first self assessment tax return. To claim YOUR discount, provide your details in the link below, and let us put you on the road to peace of mind.

*Offer open to new clients who sign up by 31 May 2020.

Do I Need To File a Tax Return?

Submitting a tax return may be necessary for a particular tax year (running from 6 April to 5 April) if you:

  • Disposed of assets resulting in a capital gain;
  • Were self-employed or in a partnership;
  • Received untaxed income (such as rental income or dividends);
  • Have income of more than £100,000;
  • Earn more than £50,000 and you or your partner claim child benefit;
  • Claim expenses or reliefs (such as employment expenses or relief for pension contributions);
  • Want to utilise tax efficient investments such as Enterprise Investment Schemes (EIS), Seed Enterprise Investment Schemes (SEIS), or Venture Capital Trusts (VCT);
  • Have foreign income;
  • Receive income from a trust or estate;
  • Live or work abroad or
  • Are non-domiciled in the UK;

This list is not exhaustive and some exceptions do apply.

Are you a company director?

Then you may have been informed that you are required to submit a tax return, even if you have no tax liability to report.  However, this is not the case, as our blog post on  the updated HMRC guidance  on tax returns for directors can explain in more detail. Having the position of director is not, on it’s own, reason to submit a tax return.

 

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What is the Health Check?

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

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

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

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

Bronze Review – from £1,500

Silver Review – from £2,500

Gold Review – from £5,000

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

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

Areas Covered

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

Areas Covered

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

Areas Covered

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

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Business Asset Disposal Relief (formerly Entrepreneurs' Relief)

Business Asset Disposal Relief is a valuable capital gains tax relief which may be available when you sell all or part of your business.

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

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

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Investors' Relief

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

Provided that the relevant conditions are met, investors who realise capital gains on the sale of their shares will be liable to capital gains tax at a reduced rate of 10%, subject to a lifetime limit of £1 million per person.

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

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Roll-Over Relief

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

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

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

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

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