Tax Advisory

Tax planning and advice is important to all businesses, particularly before your financial year end or the tax year end. At Leonherman we can carry out a thorough review of your tax affairs and any additional work that may arise as a result of this.

Corporation Tax Planning:

Research and Development

The deduction for qualifying research and development expenditure when computing taxable profits has increased from 200% to 225% from 1 April 2012.

Company Car or Private Car?

One of the most common tax queries raised by our clients is whether to purchase a vehicle in the company name or privately. Similarly, sole traders may ask whether to introduce their vehicle as a business asset or claim a mileage allowance for business travel. In addition, we may also be asked to offer a recommendation on whether to lease or buy.

The optimal position for purchasing a car will vary for each business, and we consider your personal circumstances carefully before making a recommendation on how to proceed.

Capital Allowances

The previously announced reduction in writing down allowances came into effect on 1 April 2012, reducing the rate on the main pool from 20% to 18% and the special rate pool from 10% to 8%. The length of a short life asset pool is to be increased to 8 years from the current 4 years.

The Annual Investment Allowance also reduced from £100,000 to £25,000 from 1 April 2012.

Salary v Dividend

When extracting profit from your company it is important to consider whether it would be most tax efficient to take salary or dividends. There are many factors to take into account and it is recommended that a comparison is made each tax year.

First year allowances for energy saving products.

The Enhanced Capital Allowance (ECA) energy scheme provides tax allowances for energy saving products.

The scheme offers a 100 per cent first-year allowance for investments in certain energy saving plant and machinery. If you buy equipment that qualifies, you can write off for example, 100 per cent of the cost against that year’s taxable profits. This could save you a lot of money, as well as reduce your business’ energy use, carbon footprint and climate change levy payments.

The ECA energy scheme supports a variety of energy saving technologies, such as energy efficient boilers, lighting, refrigeration equipment, metering and monitoring systems.

For companies acquiring commercial premises, are there unclaimed allowances on integral features?

Features integral to buildings

You can claim plant and machinery allowances for expenditure on certain, specified assets in a building that is in use for the purposes of your business. These are called integral features for capital allowance purposes. This expenditure qualifies for writing down allowances at the rate for the special rate pool, currently at 8 per cent.

You can claim plant and machinery allowances for the following integral features:

  • Electrical systems, including lighting systems
  • Cold water systems
  • Space or water heating systems, powered systems of ventilation, air cooling or air purification, and any floor or ceiling comprised in such systems
  • Lifts, escalators, and moving walkways
  • External solar shading

You can claim plant and machinery allowances on expenditure on both of the following:

  • The initial expenditure on a new integral feature
  • Any replacement expenditure incurred where either the whole, or more than 50 per cent, of an integral feature is replaced within any 12 month period.

Personal Tax Planning:

Giving to charity

In addition to potentially preserving your personal allowance, a gift can provide a tax free amount to a charity at a relatively low cost to you.

It is possible for an additional rate (50%) taxpayer to provide a charity with £100 at a total cost to the individual of £50.

Individual Savings Accounts (ISAs) for under 18’s

ISAs for under 18’s were introduced from November 2011. These allow children under 18 to save up to £3,600 in any single tax year, and pay no tax on the interest or dividends received from those savings.

A child under 16 will require a parent to open the account for them, and any money saved in a Junior ISA will belong to the child, becoming available to them at the age of 18.

If you have any queries regarding the above summary please do not hesitate to contact a member of the tax department.

Capital Losses

If you own assets that have lost value and are unlikely to recover their position, consider disposing of them in the current tax year to crystallise the capital loss. Losses brought forward are more flexible than those arising in the same year as you make a gain. They do not need to be claimed in full, i.e. you can reduce your gain to the level of the annual exemption, rather than wasting losses.

Capital Gains Tax:

If you dispose of a chargeable asset e.g. property, shares, a business or any other assets that are not exempt then you will be subject to capital gains tax.

The capital gains tax rules are complex and there are various reliefs available depending on the specific circumstances. At Leonherman we can advise you on whether you are subject to capital gains tax on any assets you have sold, calculate any capital gains or tax relief available and notify you of any payable costs.

Inheritance Tax:

On death, inheritance tax will be paid on assets in your estate above the Nil Rate Band for that year, currently HMRC rates are £350,000. It is important that you discuss your financial affairs with an accountant and solicitors, to take advantage of any tax planning opportunities that can be incorporated into your Will.

Inheritance Tax Annual Exempt Amount

Every individual can make the following exempt lifetime transfers:

  • Small gifts (<£250 per annum – each)
  • Gifts falling within your annual exemption (£3,000 per annum – each).
  • Gifts made in consideration of marriage (Child £5,000 per annum – each)
  • Gifts made in consideration of marriage (Grandchild £2,500 per annum – each)
  • Gifts out of ordinary income
  • Gifts made during lifetime providing you survive for a minimum of seven years after the gift

For an in depth review of your estate and your potential Exposure to Inheritance Tax, contact us to discuss the preparation of a Personal Balance Sheet and IHT report.

Get in Touch

To discuss your corporate taxation needs call  0161 249 5040 or email partners@leonherman.co.uk