10 Post Budget Tips To Save You Tax

1. Budget Overview 10 Post Budget Tips To Save You Tax 27 March 2013

2. 20 PADDY HARTY Senior Tax Partner FPM Accountants LLP MARCH 2013

4. Tax Rates

5. Allowances *Reduced by £1 for every £2 adjusted net income exceeds £100,000 **Reduced by £1 for every £2 adjusted net income exceeds £25,400 ***Reduced by £1 for every £2 adjusted net income exceeds £26,100 (2014/15 TBA)

6. Higher Rate Threshold

7. Pension Changes 2014/15 • Annual allowance: • Currently £50,000 • Reduced to £40,000 • Lifetime allowance: • Currently £1.5m • Reduced to £1.25m

8. Fixed Protection 2014 • Maintain at greater of: • Standard lifetime allowance or • £1.5m • No further contributions to scheme • No transfer from another scheme • Elect before 6 April 2014

9. Maximising Pension Relief • 5 April 2013 end of 50% relief • 5 April 2014 allowance drops from £50,000 to £40,000 • Carry forward 3 year unused relief (existing scheme holders). • In 2012/13 tax year therefore can get £100,000 tax relief • (£50,000 X 3 + £50,000) X 50% = £100,000 Tax Tip 1

10. Small Businesses Key Areas Cash Basis Election Fixed Expenses Rules

11. Cash Basis Election • To calculate profits on cash basis: • Receipts and payments only • No adjustment for debtors/creditors/stock • Initial turnover < VAT threshold: • Can continue to use until circumstances change and no longer suitable • Covers all businesses of same person • Prohibits any claim for capital allowances

12. Fixed Expenses Rules

13. Incorporation? Tax Tip 2

14. Incorporation (Cont’d) Salary 6,000 Dividend 31,000 Net 34,444 Gross £37k net

15. Salary Extraction Planning Tax Tip 3

16. Salary & Dividend Extraction Planning Tax Tip 3 Tax Tip 3: 34% reduction in tax

18. EMI and ER • Material disposal extended • EMI option granted: • At least 1 year before date of disposal • Throughout year to disposal: • Company qualifies • Individual is officer / employee • Extension where company ceases to be trading co: • Three years for disposal

19. Employee Benefits

20. Employer Allowance

21. Real Time Information

23. CGT Annual Exemption

24. Seed Enterprise Investment Scheme

25. EIS, SEIS & VCT • Investment types with generous tax reliefs • 30% income tax relief (50% SEIS) • Defer CGT (up to 28% relief) • Avoid IHT (40%) • Therefore this potentially is a 98% tax relieving vehicle for older tax payers with capital gains seeking tax efficient estate planning. Tax Tip 4 Tax Tip 4: Potential if investment fails – potential tax relief of 65%

26. Capital Loss Planning • Capital losses – only used in current year or carried forward • Crystallise capital loss before realising gains • Cannot carry capital loss back • Many property investors sitting on large capital losses • If investment via company, consider negligible value loss/claim (NVL) • NVL can be offset against ALL income in the year of the loss not just capital gains. Tax Tip 5

27. IHT Nil Rate Band • Frozen at £325,000 • Now until 5 April 2018 • Consider lifetime planning to reduce bill

28. Impact of frozen nil rate band Joint Estate £1m with 3% pa inflation 17.5% tax 14% tax

29. Inter-spouse Exemption

30. 2013 Changes • Spouse exemption to rise to £325,000 • Non dom elects: • To be UK domiciled for IHT only • Full exemption available but • Worldwide assets chargeable • Election can be backdated • Election can be made up to 2 years after death • Irrevocable unless residence ceases

32. Offshore Evasion • New agreements with: • Jersey • Guernsey • Isle of Man • Disclosure option to be available • Increased HMRC resource • Penalty can be a maximum 200%

33. Avoidance or Planning? • The Government has made it absolutely clear that tax avoidance is unacceptable and that it will crack down on attempts to abuse the law and bend the rules to get a result that was not foreseen or intended by Parliament. In contrast, tax planning involves using tax law reasonably and in the way it was intended. Tax avoidance is not the same as tax planning.

34. General Anti Abuse Rule • To be introduced in 2013 • Defines abusive schemes • Sets out counteraction

35. Avoidance under scrutiny • Partnerships: • Artificial profit allocation • Use of LLPs to disguise remuneration

36. Support for the Housing Market £5.4 billion of financial help April 2013 First Buy to provide equity loan up to 20% of value of a new build home up to a property value of £600K Mortgage guarantee scheme

37. COMPANY TAX CHANGES IN 2013 Janette Burns Tax Partner FPM Accountants LLP 20 MARCH 2013

39. Main CT Rates

40. Company Pension Contribution • Reduce your company’s exposure to corporation tax by making pension contributions for staff or shareholders. • Check maximum contribution limits for individual before making payment. • Auto enrolment is being phased in for all employers over next 5 years. • Must enrol all eligible staff into a pension scheme and make contributions on their workers behalf • Pension payment must be actually paidbefore the year end. Tax Tip 6

41. Pension Salary Sacrifice Scheme • Consider benefit for employer and employees of introduction of salary sacrifice scheme. • Pension contribution can be paid out of pre tax income. • Must be implemented properly. • Reduces employer & employee exposure to NIC. • The reduction in salary must be effected by a genuine change in employee’s contract of employment. • Employee’s entitlement to cash earnings is sacrificed in exchange for a pension benefit in kind. • The pension benefit in kind qualifies for exemption from tax and NIC. Tax Tip 7

42. How will George Osborne try to reduce borrowing?

43. PULL THE COUNTRY OUT OF RECESSION

44. Annual Investment Allowance • Tenfold increase in tax relief for capital spending • 100% tax relief • Start date 1 January 2013 for enhanced relief • Limited at £250,000 • Excludes acquisition of cars • Applies to incorporated and unincorporated businesses • Time apportioned relief • Cannot carry forward unused relief to next accounting period

45. When does AP Start?

46. Timing of capital spending may be critical. • Check the AIA allowance available to your company for accounting periods straddling 1 January 2013 beforeacquiring capital. • Example: Company with 30 April 2013 year end wishes to acquire plant costing £250,000 in April or May 2013. Tax Tip 8

47. Research & Development for SME’s • HMRC taking much broader view on what qualifies. • 225% tax relief for R&D expenditure. • For every £100,000 spent on R&D SME gets tax relief of £225,000 from 1 April 2012. • Alternatively, if company is loss making it can claim a tax repayment of 25% of cost of R&D. • £10,000 minimum expenditure requirement has been abolished. Tax Tip 9 Tax Tip 9: Review the activities of your company to identify qualifying research and development costs.

48. Patent Box • Have you developed a product/ process that is new? • Get into “the patent box” • Enables a company to apply a lower rate of corporation tax of 10% to profits earned after 1 April 2013 from its patented inventions. • Relief being phased in over first four financial years from 1 April 2013. Full reduced rate will apply from 1 April 2017. • Relief is not just for industrial giants of this world, but it can be claimed by SME’s. Tax Tip 10 Tax Tip 10: Has your company got intellectual property? Should any of it be patented to ensure your company qualifies for 10% corporation tax rate?

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50. Disclaimer We have made every effort to ensure that the information provided in this seminar is accurate, but we cannot accept responsibility for the consequences of any action you take in reliance on its contents. If following the seminar you have any matters which you would like to discuss, please contact FPM Tax Team.