top tax tips 2014

April 13, 2023CORDIUM POWERPOINT MASTER 1

10 top tax tips for 2014

LAURENCE PARRYHead of Private Client Tax

Tip 1

o LLP changeso Ensure that you know whether your LLP members

are ‘salaried’ or noto Check tests

o Capital contributiono Profit sharingo Significant influence

o Awaiting update from HMRC

Tip 1 – profit sharing arrangements

o Must be related to profit of LLP as a wholeo HMRC’s view = % of total profito But, why not stratify profit? Want to pay partner £100k

o A) 20% on profits up to £500,000; +o B) 5% on profit s above £500k.

o As long as HMRC would accept 5% as a share overall, then should be no issue;

o As long as the % in B) is less than the employers’ NIC rate still cheaper

o Must be reasonable – A) cant be too high, nor B) too low!

Tip 1 – profit sharing arrangements

o New guidance note issued 21/2o Emphasises need to relate to profits as a whole, not

personal performanceo May be able to reverse engineero HMRC give examples of ‘points’ being allocated (examples

21 & 22)

Tip 1 – ‘significant influence’

o If a member has ‘significant influence’ then wont be a salaried membero Influence over running of LLP (not just their bit, or

portfolio);o Equates to board of directors;o If don't have a management committee – perhaps could?o If business capable of disaggregation, consider separate

LLPS – eg brancheso Watch regulation and cost

Tip 1 – significant influence

o Specific discussion re regulated businesseso Para 2.5.3 ‘individual in question significantly

contributes to the firm's major decisions (management, strategic or investment-related), then it is likely that HMRC would accept that this constitutes significant influence for the purpose of Condition C.’

Tip 2 – corporate partners

o Decide!o LLP – if going to take profits out;o Limited – if profits to be retainedo Influencing factors:

o new equity holders?o potential changes to dual contractso If early years, losses available through LLP

o watch restriction

Tip 3 – corporate partners

o If Limited?o Incorporation can give benefitso Sale at Market value – may benefit from ERo Amount payable for business left outstanding and repaid

from future cash flowso Need to watch reg cap

o ‘Dry’ tax charge – 31/1 tax year following saleo Cannot sell to existing corporate member – needs to be a

Newco

Tip 4 – liquidate existing corporate partner

o May get ERo Activities must be 80% trading

o Cash on deposit not an ‘activity’o Risk if investedo If ER in doubt, consider retaining and investing without dry

tax chargeo Cost of liquidation perhaps £5k - £10k

Tip 5 – non-doms and remittances

o Be careful!o HMRC nudge letters

o Use of credit cards in UK paid for overseas;o Payment for service in UK – eg advice in relation to

offshore investmentso Overseas travel booked in UK

o HMRC aware of back to back loan arrangementso Private Eye article – Oct 13

Tip 6 – non-doms and IHT

o Inheritance tax charged on UK assetso For UK doms charged on worldwide assetso Non-doms become ‘deemed domiciled’ once

resident for 17/20 yearso (doesn't apply to Indian, Pakistani or French domiciled)

o Consider moving assets from personal to trust/company ownership in year 16

Tip 7 – overseas workday relief

o Non-dom comes to UKo For the rest of that tax year and two following:

o Income that relates to overseas work, paid AND retained overseas, not subject to UK tax

o Calculated on a days worked basiso HMRC check most day calculationso HMRC checking not ‘ordinarily resident’ in year 3

o Less of an issue going forward because of SRT, but may apply for 12/13 – get info sorted!

Tip 8 – watch losses

o Use of losses now restrictedo Capped at higher of £50k and 25% of income

o Sideways loss relief; carry back of losses; interest relief; loss on unquoted company shares

o Doesn't apply to VCT/EIS/Gift aido If think there may be losses, need to plan

Tip 9 – Gift aid

o Reduces tax o Can be carried back to prior yearo Keeping records difficult!o If donations significant, consider personal charitable

trusto If smaller, consider Charities Aid Foundationo Gifts into both allowable, and easy to track!o Need to watch restrictions (benefits received) and

sufficient income

Tip 10

oTalk to uso It will save the headache later!