Business Tax Planning

Whilst most individuals in the UK will find themselves paying income tax on their employment income during their lives, only a minority will have to deal with how tax is assessed on a business. This minority find themselves having to do this because of a conscious decision to go into business. Before doing this however they invariably have to decide how the business is to be conducted.

Planning

Businesses may be conducted through various types of trading entities, sole trader, partnership, joint venture, limited liability partnership, limited company. Whilst the tax treatment of these structures is important there can be equally important other factors – commercial credibility, limitation of liability, operational flexibility, trade or professional requirements.

Your adviser at SRG can be relied upon to guide you through the various options and ensure that the most appropriate structure is used.

As the business develops opportunities for further planning may arise. A theme over the recent past has been the opportunities that may arise due to the difference between the top rate of corporation tax, payable on the profits of limited companies and the top rate of income tax which may apply to other types of entities. In considering  this potential saving however you also have to have regard to the impact of national insurance contributions and the tax treatment of dividends (which is how after tax profits are distributed to shareholders in limited companies). It is a complex area where substantial tax savings can be made but only after a number of factors have been considered.

Compliance

Apart from the planning that arises at the start of every business and those planning opportunities that arise throughout its life, it is important that the laws and regulations are complied with and the correct amount of tax is calculated and reported to HMRC.SRG uses the most advanced computer software to ensure that the relevant tax information is presented accurately to HMRC and the correct amount of tax calculated. In addition to the compliance software the firm subscribes to a range of technical publications and databases that ensure that the partners and staff are kept up to date with changes in legislation and best practice.

Apart from the reporting and calculation of the tax that is due HMRC operate to strict timetables for the submission of information and the payment of tax, failure to comply with which, gives rise to financial penalties. SRG will advise you of these and ensure that you are aware of the consequences of any failure to comply.

Case Study

A new professional practice was looking to be established. Up until fairly recently the regulations of its professional body would have precluded certain types of structure but it was now open to them to use virtually any type of entity.

SRG presented the practice with projections as to the tax liabilities that might arise using various structures and different income levels. Following discussions with them it was decided that an LLP (limited liability partnership) would be the most appropriate type of entity to be used.

In making this decision it should be noted that operational flexibility (the ease of admitting new partners) and commercial credibility carried quite important weight in making the decision.

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