Archive for February, 2022

Company share schemes

Thursday, February 24th, 2022

EMI Scheme

Most share option schemes, with an eye to tax benefits, use the Enterprise Management Incentive (EMI) scheme.

For qualifying arrangements, there are tax incentives for the employer and employee.

The point to emphasise with EMI arrangements is that they can only be made by employers with their employees.

Unapproved option scheme

Unapproved share option schemes can be organised but there is no tax advantage for the recipient, who would be liable for income tax on the difference between the exercise price and the market value of options when exercised.

Employees may also be liable to pay NIC if the shares are readily convertible ta cash – for example, if a company is being sold.

However, unlike EMI arrangements, unapproved schemes can be offered to contractors, advisors, consultants and employees.

Growth shares

Growth shares provide the recipient with a share in the growth of the company from the date at which they were issued.

Recipients pay no tax on exercise of these arrangements but will pay capital gains tax when shares are sold.

Growth shares are useful if involving non-employees. They also minimise any dilution of value for existing shareholders.

Consider your options…

If you are considering an option or share scheme with key employees or other individuals, we can help. Please call so we can discuss the first steps.

Sharing income with your family

Tuesday, February 22nd, 2022

The UK tax system does not allow families to spread the impact of taxation where there is one significant income earner providing for other family members.

For example, if one parent was earning £100,000, they will be paying income tax at 40% rates on almost £50,000 of their income when their partner and teenage children may have no income.

One strategy to consider in these circumstances is sharing taxable income with family members. Generally speaking, this option will only be available to the self-employed or owners of a limited company. If the major income earner is employed by a third-party employer there will be limited options to consider sharing these earnings with family members.

Self-employed options

It is possible for sole traders to convert their business into a partnership with their spouse/partner and divide the business profits between them.

There will be a number of issues to consider before undertaking this strategy:

  • It is wise to have a commercial reason for the change.
  • Combined tax and NIC savings need to exceed additional costs.
  • Professional charges for taking care of a partnership and filing additional tax returns.

Limited company options

A spouse or partner taking shares or a directorship in an existing company will need to consider organising the issue or transfer of shares in the company and thus avoid triggering the ‘settlement legislation’. Settled property would be taxed as if the transfer had not taken place so no tax advantage would be achieved.

Employing a family member in the business

This is a perfectly acceptable strategy as long as there is a sound commercial reason for the appointment and rates of pay are in line with the usual rates for the type of work undertaken.

Other factors to consider if employing family members:

  • Have a detailed job description, hours to be worked and rates of pay.
  • Make sure that National Living Wage and National Minimum Wage levels are observed.
  • There are limitations on the hours that can be worked by younger family members.
  • Ensure that pension obligations are considered.

In summary

If you want to see if there is an acceptable way to bring members of your family into your business to reduce your family tax position and increase your family disposable income, we can help you create a feasibility study to quantify these savings. Please call for more information.

On-line rip-offs exposed

Thursday, February 17th, 2022

In a recent press release the Competition and Marketing Authority issued details of a poll of over 2,000 UK adults. According to the results of the poll:

  • 7 out of 10 had experienced misleading online practices
  • 85% believed businesses using them were being dishonest with their customers
  • And 83% were less likely to buy from them in the future

Following the survey, the CMA has launched a brand-new campaign “The Online Rip-Off Tip-Off” to help shoppers spot and avoid misleading online practices that could result in them being misled or suffering financial loss.

With almost one-third of all retail purchases now taking place online, after the pandemic fuelled a surge in internet shopping, the CMA has become increasingly concerned about the impact of these “sneaky” sales tactics on consumers.

Research commissioned by the CMA shows that these practices, which are carefully designed to manipulate shoppers, can lead to wasted time and money, as well as anxiety and stress, and so cause significant financial and emotional harm. It revealed that 71% of people shopping online had encountered these tactics, and 61% described their experience as negative. This is exacerbated by the fact they are often hard to spot, and people don’t know how to avoid them.

The survey also revealed that, of those who had experienced misleading online practices, the biggest concern was about hidden charges (85% of respondents), followed by subscription traps (83%), fake reviews (80%) and pressure selling (50%).

Andrea Coscelli, the CMA’s Chief Executive, explained:

“As online shopping grows and grows, we’re increasingly concerned about businesses using misleading sales tactics, like pressure selling or hidden charges, to dupe people into parting with their cash.”

He added:

“None of us would accept these tactics in the real world. But we might not realise how much they influence what we buy online. So, we’ve launched “The Online Rip-Off Tip-Off” to help hand the power back to shoppers.

“We continue to crack down on practices that could break the law, such as fake reviews. But to tackle this problem from all angles, it’s vital shoppers are armed with the tools they need too. It’s only when we all know what these tricks are, and how they are designed to manipulate and mislead, that we are better equipped to avoid them.”

According to the UK-wide survey, many respondents reported that they had wasted money on a disappointing product or experience, spent cash they couldn’t afford or wasted time trying to undo the harm caused.

Challenging your council tax band

Wednesday, February 16th, 2022

Apparently, February is the month that many homeowners take issue with their council tax banding in the hope and expectation that it will result in lower – not higher – council tax bills 2022-23.

Anticipating this, the Valuation Office, who oversee these reviews, have issued guidance. In their opening to a news story published 4 February 2022, they said:

“If you’re thinking about challenging your Council Tax band because you think it’s too high there are a few things to consider, in order to make sure you don’t spend time on a challenge that won’t be successful.

“Legally, we can only review your Council Tax band if you provide certain types of evidence to show your banding is wrong, or if it meets certain criteria. This evidence might include the addresses of similar properties to yours that are in a different band, or evidence of house prices which similar properties to yours have sold at.

“We cannot undertake such a review without any supporting evidence being submitted.”

Other circumstances that may qualify your property for a review include:

  • If your property has changed – for example, it’s been demolished, split into multiple properties or multiple properties merged into one.
  • If your property’s use has changed – for example, part of your property is now used for business.
  • If your local area has changed – for example, a new supermarket has been built and has impacted the value of your property.
  • If you’ve been paying Council Tax on your property for less than six months.

The Valuation Office Agency were keen to point out that your Council Tax band (as well as that of your neighbours) could actually be increased following a review as opposed to decreasing.

It is worth noting that council tax bandings can not only be influenced by the location of a property, but also on the size and characteristics of the building. This may help to explain why a neighbouring property is in a different band.

The Valuation Office Agency is only responsible for banding properties and entering them in the Council Tax list. Your local council sets rates and collects Council Tax payments. Any queries regarding billing or rebates should be addressed to your local council.

When did you last estimate your personal wealth?

Thursday, February 10th, 2022

During the pandemic, businesses affected by COVID-19 disruption will have had their attention firmly focussed on survival. Certain sectors have suffered more than others with the hospitality, entertainment and leisure industries bearing the brunt of lockdown measures.

But what impact has this unprecedented period had on the value of your personal assets?

One thing we cannot change is the passage of time, and if not already retired, we are all heading in that direction.

The funds we are building to finance retirement need to be reviewed in much the same way that we examine the changes in our business balance sheets.

And are we aware that many of our decisions, unrelated to finances, may have an impact on our personal wealth?

For example, increasing the size of our family, or changing our marital or civil partnership status.

An annual review

We would recommend a focussed fact-find session to determine the assets and liabilities that make up your personal wealth balance sheet. Reviewed annually, or bi-annually, this will keep you up-to-date with your personal net worth. And will help to answer questions such as:

  • Are your existing Wills and inheritance tax planning fit for purpose? Do they need changing?
  • Is your wealth increasing or decreasing?
  • What plans do you have that will impact your wealth creation strategies?
  • What are the contingent risks arising from the sale of assets in future years – capital gains tax for example?
  • Do you need to consider business exit planning?
  • Are you on track to meet funding of retirement?

Planning note

If you do have contingent risks to consider – future tax payments for example – it is always better to plan a minimisation strategy before the events occur. And a key indicator to pin down these risks is to focus on creating wealth in tax-free zones and take advantage of all the available tax allowances and reliefs to which you may be eligible.

If you are inspired to take a look at these issues, please call so that we can consider your options.

Time to top-up your pension pot

Tuesday, February 8th, 2022

We are fast approaching the end of another tax year, 5 April 2022.

To benefit from tax relief for 2021-22 you will need to make any top-up payment on or before this date.

To help you reach a decision, we have summarised the present tax rules that set out how much you can pay into your fund and still claim tax relief on the contributions made:

Annual allowance

Most taxpayers can pay up to £40,000 a year into their pension schemes. However, this allowance may be reduced if you have a high income or if you have flexibly accessed your pension pot.

Three-year carry back

If you use all of your annual allowance for 2021-22, you might be able to carry over any annual allowance you did not use from the previous three tax years. Which means that for 2021-22 once the annual allowance is exhausted you could use unused allowances for 2018-19, 2019-20 and 2020-21.

What if you pay more than your annual allowance?

The short answer to this question is that you or your pension provider will have to pay tax.

Exceptionally, this would not apply in the year you retired due to ill health, or if you died…

What about your State Pension?

While you are considering your pensions’ funding, don’t forget that it is now possible to check your State Pension forecast online.

You can use this service to find out how much State Pension you could get, when you can get your pension, and how to increase your pension, if you can.

You will need to prove your identity by signing in via your Government Gateway.

To login go to

Planning note

For 2021-22, if you are obliged to defer contributions until after the end of this tax year, perhaps due to cash flow issues, don’t forget that any unused relief for the tax year 2018-19 will be lost under the three-year carry back rule. If feasible, you may want to consider going the extra mile to fund a top-up before 5 April 2022 to at least utilise your annual allowance for 2021-22 and any unused allowance for 2018-19.

Ultimately, the amount you can invest will depend on your personal financial circumstances and will be best discussed and agreed with your pension’s advisor.

Tax Diary February/March 2022

Monday, February 7th, 2022

1 February 2022 – Due date for Corporation Tax payable for the year ended 30 April 2021.

19 February 2022 – PAYE and NIC deductions due for month ended 5 February 2022 (If you pay your tax electronically the due date is 22 February 2022).

19 February 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 February 2022.

19 February 2022 – CIS tax deducted for the month ended 5 February 2022 is payable by today.

1 March 2022 – Due date for Corporation Tax due for the year ended 31 May 2021.

2 March 2022 – Self-Assessment tax for 2020-21 paid after this date will incur a 5% surcharge unless liabilities are cleared by 1 April 2022, or an agreement has been reached with HMRC under their time to pay facility by the same date.

19 March 2022 – PAYE and NIC deductions due for month ended 5 March 2022 (If you pay your tax electronically the due date is 22 March 2022).

19 March 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 March 2022.

19 March 2022 – CIS tax deducted for the month ended 5 March 2022 is payable by today.

Beware overtrading

Monday, February 7th, 2022

If politicians have it right, we may be approaching the end of the major disruption to economic activity of the past two years.

Which is great news for those trades badly affected by continuing lockdown and other restrictions.

Unfortunately, rapid growth following a long period of depressed trading conditions can prove to be disastrous.

The danger arises if you offer your customers more generous trading terms than your suppliers and you have very little left in your bank accounts.

Consider that you have £1,000 in your current account and have no chance of overdraft or loan support from your bank. Your sales for January 2022 are excellent, £20,000, but to secure these sales you were obliged to offer customers 60 days to pay their bills.

You were able to supply goods from stock so there is no need to immediately re-stock. However, in the month of January, you need to settle past VAT and Corporation Tax liabilities amounting to £10,000 and in January and February general overheads (wages, rent, transport costs etc.) totalling a further £9,000.

The terms you have offered customers mean that the sales you have achieved in January will not generate cash-flow until March and you are faced with fending-off HMRC (£10,000) and other creditors (£9,000) for two months with just £1,000 in your bank account.

Business owners facing this dilemma need to consider their options and creating a simple cash-flow forecast will reveal the peaks and troughs in your bank balances and give you time to consider your choices.

Please call if you need help in drawing up suitable cash-flow forecasts.

Still time to consider tax planning options for 2021-22

Monday, February 7th, 2022

With rare exceptions, once the end of the tax year has passed, tax planning options to reduce liability are no longer possible.

For Income Tax and Capital Gains Tax purposes, this means that the majority of the tax reduction options will cease unless actioned before 6 April 2022, the start of the next tax year.

Which means individuals and the self-employed have just over two months to consider their options.

If you fall into any of the following categories, please contact us so we can discuss your options:

  • Your annual income is approaching £100,000, perhaps for the first time.
  • You claim Child Benefit and the income of either parent is likely to exceed £50,000 for the first time during 2021-22.
  • You have not yet considered topping-up pension contributions for 2021-22.
  • You are self-employed with a 31 March 2022 year-end.
  • You are self-employed and considering a significant purchase of equipment including commercial vehicles.
  • You are the director/shareholder of a limited company and have not yet considered voting final dividends or bonuses for 2021-22.
  • You have experienced, or are contemplating, a change in your personal status (single, married, separating, joining, or dissolving a civil partnership).

This list is by no means complete. If your tax affairs are complex pick up the phone. There is no joy in being advised after the tax year end, 5 April 2022, that if you had acted on or before that date you may have reduced your tax liabilities.

Self-isolation for those with COVID-19

Monday, February 7th, 2022

Since Monday 17 January, people with COVID-19 in England can end their self-isolation after 5 full days, as long as they test negative on day 5 and day 6.

The decision has been made after careful consideration of modelling from the UK Health Security Agency and to support essential public services and workforces over the winter.

It is crucial that people isolating with COVID-19 wait until they have received 2 negative rapid lateral flow tests on 2 consecutive days to reduce the chance of still being infectious.

The first test must be taken no earlier than day 5 of the self-isolation period, and the second must be taken the following day. If an individual is positive on day 5, then a negative test is required on day 6 and day 7 to release from isolation.

It is essential that 2 negative rapid lateral flow tests are taken on consecutive days and reported before individuals return to their job or education, if leaving self-isolation earlier than the full 10-day period.

For instance, if an individual is positive on day 5, then a negative test is required on both day 6 and day 7 to release from self-isolation, or positive on day 6, then a negative test is required on days 7 and 8, and so on until the end of day 10.

Those who leave self-isolation on or after day 6 are strongly advised to wear face coverings and limit close contact with other people in crowded or poorly ventilated spaces, work from home if they can do so and minimise contact with anyone who is at higher risk of severe illness if infected with COVID-19.

The default self-isolation period continues to be 10 days, and you may only leave self-isolation early if you have taken 2 rapid lateral flow tests and do not have a temperature in line with guidance.

The changes would appear to be an attempt to return key workers to their workplace as soon as possible.

Tax return filing and payments update

Monday, February 7th, 2022

HMRC is waiving late filing and late payment penalties for Self-Assessment taxpayers for one month – giving them extra time, if they need it, to complete their 2020-21 tax return and pay any tax due.

HMRC is encouraging taxpayers to file and pay on time if they can, as the department reveals that, of the 12.2 million taxpayers who need to submit their tax return by 31 January 2022, almost 6.5 million have already done so.

HMRC recognises the pressure faced this year by Self-Assessment taxpayers and their agents. COVID-19 is affecting the capacity of some agents and taxpayers to meet their obligations in time for the 31 January deadline. The penalty waivers give taxpayers who need it more time to complete and file their return online and pay the tax due without worrying about receiving a penalty.

The deadline to file and pay remains 31 January 2022. The penalty waivers will mean that:

· anyone who cannot file their return by the 31 January deadline will not receive a late filing penalty if they file online by 28 February,

· anyone who cannot pay their Self-Assessment tax by the 31 January deadline will not receive a late payment penalty if they pay their tax in full, or set up a Time to Pay arrangement, by 1 April 2022.

Interest will be payable from 1 February 2022, as usual, so it is still better to pay on time if possible.

One-third of self-assessment returns still to be filed

Thursday, February 3rd, 2022

HMRC has confirmed that four million out of twelve point two million taxpayers have yet to file their 2020-21 self-assessment tax returns. Which means that an equivalent proportion of taxes due 31 January 2022 will remain unpaid; at least for the foreseeable future.

We have reported on our blog earlier in January 2022, that HMRC will allow a further month, until 28 February 2022, for unfiled 2020-21 returns to be filed without incurring a late filing penalty.

And further, anyone who cannot pay their tax liabilities by the 31 January 2022 deadline will not receive a late payment penalty if they pay their tax in full, or set up a time to pay arrangement, by 1 April 2022.

Which begs the question, why bother filing a return earlier in the tax cycle?

Two reasons for filing – or preparing a return for filing – earlier in the tax cycle, are:

  • Preparing a 2020-21 return quantifies any income tax or NIC that will need to be paid on 31 January 2022. In a nut-shell, taxpayers who prepare their returns shortly after the end of the relevant tax year, will have more time to save funds to clear tax due the following January. In theory you could prepare your 2020-21 return during April 2021 which would give you nine months to save for any tax due.
  • The 2020-21 return will reveal any balance of taxes due for 2020-21 and also set the amount of any payments on account for 2021-22 (these payments on account are due 31 January and 31 July 2022). If you consider that taxable earnings in 2021-22 are going to be lower than those during 2020-21, you can elect to reduce payments on account for the later year.

The four million taxpayers, who we are advised are still to file for 2020-21, may be in for a shock when their liabilities are finally revealed in the coming month. Although HMRC have been generous in forgoing late filing and late payment penalties for restricted periods, interest will still be charged on tax paid after due dates.

We have all suffered from the impact of the pandemic to some degree, either personally or in a business capacity in the last two years, but the old maxim, be prepared, still holds water; and we would advise all taxpayers to adopt the sooner rather than later approach when they come to consider tackling their self-assessment tax returns for 2021-22.