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Within Garbutt & Elliott we have a full team of tax specialists able to offer a comprehensive range of tax advisory services covering all aspects of taxation for both direct and indirect taxes. We are also able to provide international tax advice through Praxity AISBL, a global alliance of independent firms.
At Garbutt & Elliott we pride ourselves on bringing imaginative and appropriate tax advice to individuals, family businesses and other privately owned businesses, as well as trusts and charities. Our emphasis is on technical excellence and helping clients understand and manage any tax risks.
Recent examples of tax projects undertaken for clients include:
- Protecting “surplus” company cash from Inheritance Tax
- Dealing with a National Minimum Wage inspection
- Remuneration Planning
- Sheltering partnership profits at corporate tax rates without incorporating
- Realising significant tax savings on the sale of private company shares
- Delivering super-efficient ways to buy business property in a pension fund
Please click on your area of interest below:
Business succession issues
See our separate section on Succession Planning and Business Owners Succession Solutions.
Specialist tax advice in this area covers matters such as:
- Inheritance tax
- Capital gains tax on gifts
- Capital gains tax on business sales
- Using trusts
- Employee share schemes
For further details, please contact Nigel Shaw or Adrian Widdowson.
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Business valuations
Our Corporate Finance team deals with business valuations for commercial purposes. However, valuations are often needed specifically for tax purposes. We can provide assistance in valuing company shares and unincorporated businesses and negotiating with the Inland Revenue Shares Valuation Division in the areas of:
- Deceaseds' estates
- Lifetime gifts
- Sales between related parties
- Employee share schemes
- March 1982 valuations for capital gains
- Periodic valuations of assets in discretionary trusts
- Incorporation of a business (see Forming a company)
- Part disposals, share exchanges etc
We can assist not only with dealing with the Inland Revenue on transactions that have already taken place, but also in relation to the likely impact of tax on future plans where valuations are an issue.
For further details, please contact Nigel Shaw or Adrian Widdowson.
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Capital investment
The tax system gives relief for capital investment mainly by way of capital allowances for plant and machinery and certain types of buildings, or depreciation on intangible assets. Particular areas where we can provide help include:
- Identifying the plant and machinery content of buildings to enhance allowances
- Advising on the allocation of consideration in business sales and acquisitions to maximise allowances and minimise claw-backs
- Enhanced capital allowances on water- and energy-efficient plant
- Tax relief and tax credits for research and development
- First year allowances for small and medium-sized businesses
- 100% allowances for conversion costs of residential flats
- 100% allowances on low-emission cars
For further details, please contact Adrian Widdowson, Duncan Meredith or John Guy.
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Car or cash?
Company cars are taxed by reference to their CO2 emissions and, since April 2003, so has the fuel scale charge. As each car will have its own CO2 rating, and the list price varies by reference to model and specification, it follows that the taxable benefit is different in just about every case. Follow this link to our car tax calculator. The calculation of an accurate cash alternative is consequently a finely-tuned "bespoke" operation.
The answer is also affected by factors such as the residual value of the vehicle, the business/private mileage split and whether or not the driver is a higher rate taxpayer, and/or over the NIC upper threshold. We have a spreadsheet into which all this data is entered and which then shows where the "break-even" point is for both the company and the driver. Contact Ray Cadman or Richard Whitelock for more details.
Traditionally, company cars have usually been provided along with "free" fuel for both business and private motoring. In such cases the private fuel benefit is taxed by means of a scale charge, i.e by taking a figure of £14,400 and multiplying that by the CO2 tariff figure. For high CO2-rated vehicles this will mean a very large tax bill, on top of which the company will pay Class 1A NICs of 12.8% on the benefit.
In many cases it is much better to pay a cash alternative. Again we have a spreadsheet model which takes care of these calculations and calculates, firstly, whether it is better to give up the private fuel and, if so, the optimum cash alternative figure. Again, you should contact Ray Cadman or Richard Whitelock for further information.
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Company directors and employees
We have a specialist team dealing with remuneration planning. The advice we offer covers such areas as:
For further details on employee share schemes please contact Adrian Widdowson or Ray Cadman and, for the other topics listed, Ray Cadman or Richard Whitelock..
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Construction Industry
Construction is one of very few industry sectors singled out for special, and quite onerous, tax treatment. Known as the Construction Industry Tax Deduction scheme, or CITD for short, it imposes stringent compliance obligations on both contractors and sub-contractors. To be paid at all, a sub-contractor must have at least a registration card issued by the Inland Revenue. To be paid gross, a sub-contractor must obtain from the Revenue a gross payment certificate, CIS 6; larger businesses can apply for a more "user-friendly" version of this, the CIS5.
In addition to a turnover test, the legislation imposes strict compliance tests which must be satisfied before gross payment certificates can be issued. For existing businesses, these tests have to be satisfied for the whole of the three years prior to the application. Tests include filing returns and making PAYE payments on time. We can advise on the detailed rules and may be able to assist in cases where the Inspector has issued a refusal. Please contact Ray Cadman or Richard Whitelock for assistance.
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Employee share schemes
Both employers and employees have an interest in share schemes. For the employer they are a key means of motivating and rewarding staff. The employee will be attracted by the tax efficiency of Inland Revenue approved and EMI schemes, as well as by the chance to gain an equity stake in the business.
We can assist with:
- Design of share schemes
- Balancing interests of employees and existing shareholders
- Choice of scheme - Inland Revenue approved all-employee or discretionary schemes, EMI or unapproved arrangements
- Share valuations
- Presentations to employees
- Supporting documentation
- Notices and Inland Revenue formalities
For further details, please contact Adrian Widdowson or Ray Cadman.
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Employment taxes
As an employer, you are faced with an increasing bureaucratic burden in terms of PAYE, NIC, student loan repayments, statutory maternity/paternity pay and so on. At the same time, you are looking for tax-efficient ways to reward your staff.
Please see the separate page on Business Support: Bookkeeping Payroll & Systems.
You may also be interested in the same matters that affect Company directors and employees and in Employee share schemes.
Our specialist services to employers also include:
- PAYE healthchecks
- Dealing with Inland Revenue inspections and disputes
- Advice on employed v self-employed status (our section on IR35 may also be of interest, here.)
For further details, please contact Ray Cadman or Richard Whitelock.
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Expatriate taxation
In this age of relatively easy travel and rapid communications, businesses have the ability to operate overseas, and of course overseas companies may wish to operate within the UK. (Inward investors should click on this link.) In addition, many UK businesses are finding that they are able to use foreign employees with particular skills, e.g in the IT field, more cost-effectively than UK personnel. However there are some potentially expensive tax traps to be avoided here.
Employees, too, have become more mobile. Traditionally, the expatriate community has tended to work in the Middle East and in the developing countries but, nowadays, individuals with expertise can find themselves on assignment almost anywhere in the world. The tours of duty may typically be one to three years, which will normally involve taking up temporary residence in the host country. This may involve family relocation, renting out the matrimonial home, or the expat may take up solo temporary residence abroad. Alternatively, the overseas project may take the form of numerous shorter trips abroad.
Whatever the scenario, the UK tax and Social Security situation can be fearsomely complicated and this is definitely an area which requires specialist advice. In addition, the tax and Social Security provisions in the host country may also need to be established, and this is where our worldwide links to fellow-MRI associate firms comes into its own. For advice for employers sending staff abroad or using foreign employees in the UK contact Ray Cadman. For other expatriate advice you should contact Richard Whitelock.
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Forming a company
Tax changes in recent years means that there has never been a better time to run a business through a company. We can help with:
- Advising on the tax consequences of transferring to a limited company
- Planning to optimise your tax position
- Liaison with legal advisers on the business transfer agreement
- Helping to manage the process, covering such matters as VAT registration, PAYE schemes and other tax formalities
- Planning for the situation after incorporation, for example remuneration strategies, dividend planning and so on
For further details, please contact Adrian Widdowson, Duncan Meredith or John Guy. You may also find our link to remuneration planning useful.
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High net worth individuals
Advising high net worth individuals is rightly regarded as a specialism in its own right. We often assist our clients to overcome concerns in the following areas:
For further details, please contact Nigel Shaw or Richard Whitelock.
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Incorporation
Click on this link: Forming a company
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Inheritance tax
Click on this link: Passing wealth to future generations
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International tax
If you are thinking about setting up or expanding an overseas operation you will need to consider such matters as whether to operate via a branch or agency or set up a subsidiary company. As a member of MRI we have contacts with associated firms in most corners of the globe who will be happy to assist. We can also give advice about such issues as transfer pricing and the taxation consequences for the employees charged with running the operation: please see our sections on Expatriate taxation or Inward investors.
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IR35
If you are reading topic it is probably because you are aware, at least in broad terms, of the rules affecting personal service companies ("PSCs"), commonly referred to as the IR35 rules.
The rules apply where, but for the existence of the PSC, the engagement terms between the individual performing the services and the payer are such that it would constitute a contract of service, i.e an employment. (Each engagement must be considered separately.) If this is the case then the PSC has to operate PAYE and NICs on the "deemed" employment income. In brief this is all of the earnings less a fixed 5% deduction and allowable travel etc expenses. This can be punitively expensive, with the individual and the PSC together paying tax, Employer's and Employee's NICs on nearly all of their earnings.
There are numerous factors which must be weighed in trying to decide whether there is a contract of service, or for services, which would be self-employment; these are too numerous to list here. Each Tax District has appointed a status Inspector whose job it is to consider employment vs self-employment, either within the context of IR35, or in non-PSC situations. The starting point for the Inspector will be the contract itself, and any third party contract, say with an Agency. Beware those who tell you there is such a thing as an IR35-proof contract - there is not. The Inspector will usually seek to get "behind" the contract and establish the true contractual nature of the engagement before giving a ruling. Rulings can, however, be challenged under an appeals procedure.
Our employment taxes specialists, Ray Cadman and Richard Whitelock, have particular expertise in advising on this subject.
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Mergers and acquisitions
Whether you are the buyer or the seller of a business, or engaging in a merger of business equals, tax advice is essential. We can help with:
For further details, please contact Adrian Widdowson, Duncan Meredith or John Guy.
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Owner-managed businesses
A key part of our practice is advice to family and owner-managed businesses. Issues and areas of advice that we commonly encounter include:
For further details, please contact Adrian Widdowson, Duncan Meredith, Ray Cadman or John Guy.
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Passing wealth to future generations
Our advice in this area often involves common threads such as business succession issues and planning related to the private residence.
- Tax-efficient wills
- Using trusts
- Inheritance tax and capital gains tax planning
- Trusts for minors
- Making gifts in lifetime
For further details, please contact Nigel Shaw or Adrian Widdowson.
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Pension planning
All too often, pension planning takes a back seat to the urgent day-to-day issues of running a business or career. However, it is widely acknowledged that postponing pension planning is a recipe for disaster. We can help you through the maze of tax rules, working with your financial adviser to find the best pensions solution for you.
You may also be interested in Independent Financial Services.
For further details, please contact Nigel Shaw or Adrian Widdowson.
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Personal tax returns
We deal with personal tax returns ranging from the employee with salary and benefits to the more complex circumstances involving investment portfolios, trust interests, investments in land and so on. At Garbutt & Elliott we take pride in offering pro-active advice on tax matters, rather than simply filling in the return form for you.
For further details, please contact Richard Whitelock.
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Planning to sell a business
As with all tax planning, the earlier you start to prepare for the potential sale of a business, the better. We can guide you through the rules that you need to be aware of to optimise your tax position on sale, dealing with questions such as:
- How is the tax on sale calculated?
- Should you sell assets or shares?
- Is this a good time to incorporate the business?
- Does the balance sheet need cleaning up to improve the capital gains tax position?
- Is it a good idea to make gifts of shares before sale?
- What are the implications of being offered consideration in shares or loan notes?
- Are there any ways to shelter gains arising on sale from tax, and should you do this?
For further details, please contact Adrian Widdowson, Duncan Meredith, John Guy or David King.
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Private residence
Most people are aware that they can sell their private residence free of tax. However, there are complications in the rules, and we can often help to reduce tax liabilities, typically in the following circumstances:
- Occupiers of tied accommodation
- Owners of second homes
- Houses with unusually large grounds
- Planning to sell part of the land for development
- Owning homes occupied by relatives
For further details, please contact John Guy or David King.
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Property owners
We advise on all aspects of property transactions, including both property investment and development. Particular aspects where our expertise has been called on in the past include:
- Joint ventures
- Companies and unincorporated property ownership vehicles
- Property acquisitions and leases
- Optimising claims to capital allowances (see Capital investment above)
- Transfers of industrial buildings allowances
- Structuring and financing development projects
- Taxation treatment of income and capital receipts and expenses
- Exit routes including sales of property portfolios and companies with property interests
- VAT options to tax
- VAT implications of property sales
- Issues relating to stamp duty.
For further details, please contact Duncan Meredith or John Guy. [On VAT matters, please contact Jane Roffey.]
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Remuneration planning
Legislative changes in recent years have made the subject of remuneration planning a particularly tricky, but potentially very rewarding, topic, especially for owner-managers, who are in a position to determine how they take their company profits. With this sort of planning one has to imagine that the company its owner-manager are two hemispheres in a circle. Assuming he or she owns all the shares, all that really matters is how much tax etc leaves the circle. It really doesn't matter how that is comprised as between corporation tax, National Insurance, income tax or VAT.
Dividends up to the director/shareholder's basic rate ceiling attracts no tax liability whatsoever! Even if all the basic rate band is used tax will only be paid on the "excess" dividends at a net rate of 25%. It is however important to understand that there is a trade-off when considering dividends. A dividend is just a distribution of profit, therefore, unlike remuneration, a dividend does not reduce the corporation tax payable. Companies get a corporation tax deduction for both the remuneration costs and the associated employer's NICs.
Whether one should sacrifice salary or pay a dividend crucially depends on the expected level of the company's profits, and similar considerations apply in deciding whether or not to pay a bonus after the company's financial year end. The calculations can also be affected by the question of whether to run a car through the business or pay for it privately out of a cash alternative. (See link to car or cash).
When there are other shareholders involved, such as a spouse, the savings can potentially be multiplied. However, the Inland Revenue has made it clear that it will monitor such situations and, where appropriate, will seek to invoke the anti-avoidance legislation. Careful planning and sound advice are essential. Contact Ray Cadman or Richard Whitelock for more information.
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Rewarding the business owners
The reward to the owners of a business can come in various forms, as they are the providers of capital, entrepreneurial risk-takers, and often workers in the business as well. Our advice here closely follows the areas of:
but we also often move into areas such as business succession issues, business valuations, and planning for high net worth individuals generally.
For further details, please contact Adrian Widdowson, Duncan Meredith, John Guy or David King.
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Starting up in business
Starting a new business is a time of excitement as well as uncertainty. There will be many new things to learn, and administrative issues that you were only dimly aware of before, if at all. We have great experience of helping our clients through this phase, advising them on such matters as:
For further details, please contact Adrian Widdowson, Duncan Meredith, John Guy or David King. [On VAT matters, please contact Jane Roffey.]
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Succession planning
See business succession issues
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Tax investigations
Facing unwelcome attention from the taxman? Undergoing a tax investigation is a stressful and difficult experience for anyone. We aim to step in between you and the tax investigator, relieving you of the stress of having to deal direct, and ensuring that you get the best result possible.
A tax investigation can range from a self assessment enquiry made by the local Tax District through to Special Compliance Office investigations, which can be where fraud is alleged ("Code 9" enquiries, otherwise known as "Hansard") or cases involving tax avoidance ("Code 8"). You should contact our tax investigations consultant, Ray Cadman, who is an ex-Inland Revenue Inspector with experience in all these areas, as well as those involving possible prosecution, where the opening interview is conducted under formal caution.
We are equally happy to carry out assignments where we are engaged directly by the taxpayer or, in the case of referrals from solicitors, banks or other accountants, by the referring firm. For referred cases, we are not interested in taking on the day-to-day accountancy and taxation needs of the referred individual or business, as we recognise that to do so will adversely affect our relationship with the referring practice. We will however be more than happy to provide other specialist advice, should it be sought, under a separate engagement.
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Tax issues of raising business funds
General issues to do with fund-raising are dealt with by our corporate finance specialists. Specific tax issues include:
- Raising equity funding under the Enterprise Investment Scheme or Corporate Venturing Scheme (see Tax relief for investors)
- Obtaining tax relief for individual equity investors on loan interest
- Deciding on the most appropriate mix of debt and equity funding for a business
- Business structures generally, including the question of whether the business should be incorporated (see Forming a company) and how assets should be held
For further details, please contact Adrian Widdowson, Duncan Meredith, John Guy or David King.
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Tax relief for investors
There are several Government-backed schemes to encourage investment in business. The Enterprise Investment Scheme gives individuals the following tax benefits:
- 20% tax refund on amounts invested up to £200,000 a year
- Deferral of capital gains already realised, by investing the gains in EIS shares
- Tax exemption for gains on sale of EIS shares
The similar rules for company investors, under the Corporate Venturing Scheme, offer companies the following benefits:
- 20% tax refund on amounts invested, with no upper limit
- Wider scope for tax relief on losses on CVS investments
- Deferral of gains on CVS investments against further CVS investments
If the investment produces a loss, you may be able to claim relief for the loss against your income. This applies to individuals and investing companies.
Individuals can also benefit from the favourable tax treatment of Venture Capital Trusts. A VCT is a company that raises money to invest in smaller trading companies, hoping to sell those investments at a gain. In this case, you can have:
- A 20% tax refund on amounts invested up to £200,000 a year (40% for shares issued from 6 April 2004 to 5 April 2006)
- Tax exemption for gains on sale of VCT shares
- Tax-free dividends
In addition, the VCT itself pays no tax on gains that it makes on selling its investments. We can not advise on specific investments, but we can ensure that you are aware of the tax rules that you will need to adhere to with these investments.
For further details, please contact Adrian Widdowson, Duncan Meredith, John Guy or David King.
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Tax relief for science-based companies
Various tax incentives are available for science-based businesses. They include:
- 100% capital allowances on premises and equipment used for research and development work
- Small and medium-sized (or "SME") company R&D tax credits
- Large company R&D tax credits
- Vaccine research relief
The SME R&D tax credits are available to small and medium-sized companies that carry out or commission R&D work on their own behalf and spend above a minimum figure in a year. The benefits are:
- 50% addition to the deductible expense for tax purposes for R&D related staff costs, consumable stores and sub-contract costs
- Payment in cash from the Inland Revenue of up to 24% of R&D costs if the company is not yet trading or makes a loss
Large company tax credits give a 25% uplift to the tax-deductible costs for companies actually carrying out R&D work, whether for themselves or others.
Vaccine research relief adds 50% to the actual costs of researching into certain diseases that are prevalent in the Third World.
For further details, please contact Adrian Widdowson, Duncan Meredith or John Guy.
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Termination payments
Sadly, for whatever reason, it is sometimes necessary to terminate an employee's employment. The received wisdom is that one can pay £30,000 tax-free whenever this happens. This is not necessarily the case! The entitlement to the £30,000 exemption largely depends on what the contract of employment says about the notice period, and/or the employer's ability to make a payment in lieu of notice. There are also complications if the employee is at or near retirement age.
Normally, where the parting is reasonably amicable (and sometimes when it isn't), a compromise agreement is drawn up. We can advise either the employer or the employee in this situation. It is mutually advantageous for the payment to attract the £30,000 exemption, as that should ensure that the employer does not have to pay NICs on the severance payment. Sometimes it is necessary to secure tax clearance from the Inland Revenue to make the severance payment tax-free, or taxing just the excess over £30,000.
Issues such as continued use of a company car or membership of a private medical scheme, or a commutation payment instead, need to be addressed, as do aspects like restrictive covenants. Matters can be complicated further where the departing employee is a shareholder director and the shares need to be acquired. Invariably, the departing employee must receive legal advice and we are accustomed to working with lawyers (for either party) in these situations.
For assistance in this complex area contact Ray Cadman.
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Trust services
Please see Passing wealth to future generations
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Value added tax
Most businesses will have to come to terms with VAT. The object of our advice in relation to VAT is to make this as painless a process as possible. We can help with:
- VAT registration
- Advice on options to tax in relation to property
- VAT health checks
- VAT planning generally
Our Business Support team can help with bookkeeping and the completion of VAT returns.
For further details, please contact Jane Roffey.
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Voluntary sector
As well as the full range of accounting, audit and business advisory services and support that we provide to many charities and voluntary organisations, our tax team includes experts familiar with all the direct and indirect taxation issues, employment taxation etc. Our advice covers:
- The tax implications of charity trading
- Sponsorship and fundraising
- The use of trading subsidiaries and profit shedding
- Advice on the legal aspects of the organisation and set up of charities, including trusts, guarantee companies and the role of charity trustees
For further details, please contact Duncan Meredith.
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