“Later on, we’ll conspire as we dream by the fire
To face unafraid the plans that we’ve made
Walking in a winter wonderland”
We’re not quite sure what Felix Bernard (bet you didn’t know who wrote Winter Wonderland until you read our Square Circular!) had in mind when he wrote those words. “Conspire”, “dream”, “plans that we’ve made” – must be to do with tax. Hopefully, the Square Circular will inspire some dreams and plans.
If you want more details about any of the dreams and plans we’ve mentioned in this Issue, or indeed, about any dreams or plans we haven’t mentioned please do contact us on 0161 832 4841.
• A welcome to Tanya McCauley, our new graduate trainee. We wish her every success and hope she enjoys being with us.
• Budget Day announced for 22 April.
• Time to pay arrangements with HMRC are doing very well. Apparently HMRC have done over £1 billion worth of deals. Easy sell!
DREAMS AND PLANS
From time to time we give you an update on what’s happening in the world of tax mitigation. We haven’t done that for a while; not since Square Circular Issue 18 in summer 2007.
Perhaps that’s because we’ve detected some falling off in interest. Not too long ago we could expect regular letters, emails and telephone calls from scheme promoters trying to interest us (on your behalf) in their strategies, all of which, of course, come with a robust Counsel’s opinion. We suspect that the downturn in the number of products is caused by two main factors. First, in a recession people aren’t so concerned about sheltering profits; they’re too busy thinking how best to utilise losses or persuade HMRC to allow time to pay old tax bills. Secondly, it could just be that the disclosure regime started by the previous Chancellor of the Exchequer (remember when Gordon was Chancellor?) really is working and we vulnerable taxpayers are afraid to take on HMRC.
That’s not to say that the fountain has completely dried up. Current offerings include:
– corporation tax mitigation and profit extraction strategies using trusts;
– income tax strategies of a low to medium risk nature;
– CGT mitigation;
– Stamp Duty Land Tax saving for both residential and commercial acquisitions.
Obviously, to incur costs and take risks the savings have to be in pounds, not pennies. If you think there might be something of interest it’s worth a phone call to let us know and we’ll pursue it further.
PLANNING FOR GROWTH – EMPLOYEE SHARE SCHEMES
Funny sort of title in times of recession. Most people are planning just to survive. But, a bit of thinking ahead doesn’t do much harm. Now could be just the time to do that thinking.
Human resources are an important asset for any business. For some businesses the quality of staff you employ can be vital. You want to keep good staff which isn’t so easy if you can’t afford to pay them more than you already are doing. Sure, your competitors can’t afford to pay them more than you and there aren’t even that many jobs around for them. But when the green shoots have started to turn into young saplings in say 9 or 12 or 15 months time and business is “on the up” once again how do you ensure that these people are still in your team.
Paradoxically, a time of downsizing may be the time to think big. If you can’t offer those senior key employees much of a bonus this year, why not offer them the option of buying into your company when things get better, but at today’s value. That may be just the stimulus they need to help you make sure that things do get better. And if you’re currently bucking the trend and doing very nicely thanks to your devoted staff and the handsome salaries you’re paying them, a stake in the company when things get better will help all the more to keep them on your side.
Two particularly beneficial option schemes CSOPs and EMIs (sorry about the acronyms) involve share valuations and the lower the valuation, the more attractive the options may be to the employee. Now may be just the time to negotiate and agree a depressed value with HMRC.
So if you want to know what those acronyms stand for, get in touch and let us tell you all about those CSOPs and EMIs, not to mention other employee benefits which don’t have such code names.
AT YOUR DISCRETION
There is a growing perception that the use of trusts is becoming less tax efficient and more complicated. Some say it just isn’t worth getting involved with trusts.
That would be a pity. There’s an animal called a “nil rate band discretionary trust” which in certain circumstances can be a really clever creature. They can be particularly suitable vehicles to transfer assets which currently have a low value but which are expected to grow appreciably over the next few years. An Inheritance Tax (Ih.T) liability can be avoided if the settlor (that’s the chap putting the asset into trust) does not see his Ih.T nil rate band exceeded and the trust is broken before its 10 year anniversary. What’s more, if the asset is a capital gains tax (CGT) chargeable asset, the discretionary trust route can provide you with CGT holdover relief which is rather unusual if the asset is not a business asset.
Please call your usual contact partner or our tax partner, Simon Topperman, if you want to know more about these trusts.
GRANT AN OPTION BEFORE YOU DIE
If a shareholder director of a company dies, quite often there is a provision in the shareholders’ agreement which requires the personal representatives of the deceased to sell and the other shareholder directors to buy the shares of the deceased. The funding is quite often provided by a policy on the life of each shareholder for the benefit of the others.
Health warning! This kind of arrangement could seriously damage your Inheritance Tax Business Property Relief entitlement. One way round the problem might be to grant options for the sale and purchase of the shares.
The same applies if for “shareholder” you read “partner” and for “company” you read “partnership”. Let us know if you’d like us to have a look at your shareholder/ partnership agreement and see if anything needs changing.
WHO’D WANT TO BE A TAX OFFICER?
Lot’s of people, according to HMRC’s latest warning, on fraud and scams. If you get an email from a site purporting to be HMRC asking for personal or payment information so they can send you a tax rebate think twice before you reply. HMRC has recently issued one of their periodic warnings and have made it clear that they would not inform customers (they mean, victims) of a tax rebate via email or invite them to complete an online form to receive a rebate of tax. The same would go for telephone calls.
If you do receive a fraudulent email, you should forward it to email@example.com
– Don’t forget that penalties for late filing of accounts at Companies House have recently gone and the filing period allowed has gone . Laws of gravity?
– The European Court of Justice (that lot in Luxembourg) has decided that Member States cannot limit tax relief to charitable gifts made only to registered charities in that Member State. Does this mean we’ll see an outpouring of generosity towards Irish, French, Belgian, Spanish etc. charities?
– From 27 January 2009 the interest rate on overpaid corporation tax (not due by instalments), income tax and CGT reduced to 0%. This followed the cut in bank base rate to 1.5% earlier in January. HMRC obviously passes on rate changes to its customers. Of course, bank base rate has since reduced to 1%. Wonder if we’ll soon have to pay them interest on our overpaid tax!
– On 1 April 2009 HMRC’s new compliance checking framework comes into effect. Maybe we’ll leave that for next time.
“Next to being shot at and missed, nothing is quite as satisfying as an income tax refund.” (F J Raymond)