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Employing close family - tax efficient or tax trap?

It's common practice for clients to put family on the payroll. This can be tax efficient despite HMRC viewing such arrangements suspiciously. How can you support your clients in their claim for a tax deduction? Tax deductible or not? A particular area of contention between businesses and HMRC is whether an expense has been incurred "wholly and exclusively for the purpose of the trade". If it hasn't, no tax deduction is allowed. With this rule in mind, a tax inspector's interest will be especially piqued by the appearance of a payment in a client's payroll or accounting records to a spouse, or other family member, and questions will often follow. Justifiable expense HMRC will first want to es

Will your client qualify for the new "goodwill" relief?

The Finance Act 2019 created relief for intangible assets including goodwill. The new relief applies to qualifying expenditure incurred on or after 1 April 2019. Will your clients qualify if they acquired the asset prior to this? Recap - relief lost for goodwill Rule changes made in December 2014 and July 2015 saw tax relief for companies on the cost of goodwill attacked twice. The first change blocked relief for goodwill where it was internally generated, i.e. built up by the business rather than purchased from someone else, but only if it was transferred (sold) to the company by someone related to it. The second change scrapped all relief for goodwill with effect from 8th July 2015. Relief

Tax-free perks for 2019/20 - how to take advantage?

With the tax year almost half-way through, directors of your corporate clients can take advantage of tax and NI-free trivial benefits. What advice can you give them to ensure they get the maximum advantage from the exemption? Trivial recap Since April 2016 employers have been able to provide any number of small (trivial) benefits in kind to their employees without them counting as taxable perks. HMRC relies on three factors to prevent the exemption being exploited: • The exemption doesn't apply if the benefit is given as a substitute for normal wages. • Employers are cost conscious and so won't want to pay for vast numbers of perks for employees. • Directors of companies probably won't wo

New Guidance on company winding-up rules

HMRC has been forced to make changes to its approach to the anti-avoidance rule which can apply to shareholders who wind up their companies. What advice can you give to affected clients? Targeted anti-avoidance Since April 2016 if your client winds up a company are they are involved with a similar business in the following two years, a targeted anti-avoidance rule (TAAR) can increase their tax bill. Normally, they'll pay capital gains tax (at 10% or 18%) where they receive more from the company than they pai for their shares in it. However, if the TAAR applies, income tax (at up to 38.1%) is payable. For example, if the value of their share of the company increased by £500,000 from when it w

Incorporating a business - the hidden tax

Your client intends to transfer their business to a company. They think that any resulting tax charges can be legitimately avoided. However, you believe there will be tax to pay. Who's correct? Tax and other advantages One of the main motives for transferring a sole-trader business to a company is tax saving. Your client may have read about the process, and how it's possible to legitimately avoid paying capital gains tax (CGT) through the use of special claims. However, what's almost invariably overlooked is the possible stamp duty land tax (SDLT) charges which can apply and are far more difficult to shake off. Transfer to a company When land, buildings or other assets (and even liabilities

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