. No matter what industry you operate in, you need advice from someone with knowledge and experience relevant to you. Some accountancy firms will offer their services to any interested party regardless of whether they have any specific knowledge of the industry concerned. We are exceptional in that if we do not have direct knowledge or experience of your business then we will be honest and tell you. We can advise you on all the necessary forms that are required to avoid penalties arising. We can advise you on matters such as National Insurance, VAT registration, whether to operate as a sole-trader, partnership or limited company and operating a payroll scheme. Indeed many of the problems you will face, we will also have faced and we can therefore help you to overcome them.
Many of our clients, particularly smaller businesses, wish to transfer the entire burden of VAT onto our shoulders and this is something we are happy to do, if so required. A more cost effective method is for our clients to prepare their own VAT returns and then submit them to us for checking. We are of course always available to lend a helping hand. We benefit from the many years of practical experience that our directors and staff have in the fields of accountancy support, company administration and taxation advice, ranging from small practices to national firms, and from university lecturing to teaching the professional accounting examination syllabus.
Tax & Financial Planning: Whether your goal is a simple retirement, the sale/flotation of your business, or even a divorce! We will assist you to map out your short, medium and long-term goals, and minimise any tax that you might have to pay. Capital Gains: share splits, buy-backs, scrip and rights issues and the like will complicate your affairs and "tax" the patience of most people. We will guide you through the process, and re-construct your holdings history if needed. UK and offshore trusts: very common, but often equally complicated. Loved by some, but feared by others. An essential ingredient of many effective tax-planning schemes. Domicile status: not to be confused with tax "residence", and you may have lived in the UK all your life, but establishing a non-UK domicile status can have major tax advantages.
Choose one of the following packages that will best serve you:
Further information
Coddan offers company formation, ready-made company registration for UK limited companies. We offer electronic filing enterprises & registering corporation services. In addition to business registrations we offer trademark registration, shareholder agreements, toll-free numbers, telephone answering, virtual office and company searches for UK limited companies. You are an accountant for whom company establishment is a frequent activity or an individual ordering your first company registrations. Limited company startups and UK trading company. Sameday limited companies Ltd Co formations with fast formation in around 2-4 hours. Company Registration - register your company instantly low fees start your successful business.
Register your company easily online or setting up an Ltd company? Quick paperless company formations or even faster limited company set up. Comprehensive, professional company registration services. Incorporation & business starting-up advice, express company establishment. Great value business registration, register your company online. Business start-up & open new company advice. Forming your company officially with Companies House, we offer professional company startups. Get your company formed in one day, we may helps with practical online help & advice on LLC registration in London, Edinburgh, Glasgow, Chelsea, Manchester etc. Start a company by incorporating or forming a LTD, PLC or LLP at Coddan. Learn about incorporation & how to incorporate your business online.
Whether you start-up online, register London business or form a corporation Scotland, we can help you understand the business start-up process for filing LTD United Kingdom. Incorporate or Form an LLC - Online! Company registrar United Kingdom, limited company formations & corporation registration, electronically LLC online, very easy and informative. In addition to private companies Great Britain, we offer trademark registration, shareholder agreements, 0870 numbers, telephone answering, virtual office and company searches for English companies. Information to help start, grow or manage a small business. If you are starting a business Edinburgh or starting own business Northern Ireland, read our starting business Republic of Ireland guide.
Home business and small business training and ideas site to help you start Belfast, grow, and expand a home-based business or search for the work at home job right. An outline of the general steps for incorporation in Great Britain, explaining how to incorporate your business Dublin, from choosing where to incorporate your business. UK ready-made company formation services and company registrations online, our offices keep a stock of ready made companies, and would be happy to supply details on request. We offer offshore ready-made companies in different jurisdictions, readymade companies also called as offshore companies, shelf companies for sale.
Welcome to the UK Taxation Directory, an independently compiled catalogue of www.ukincorp.co.uk sites and material of potential interest to tax professionals and others seeking on-line information on UK tax matters.
If you work for an employer in the UK or if you are a self-employed contractor in the UK, income tax deducted from your pay. If your work in the UK is for a temporary period, you will most likely be entitled to a British tax refund. As specialists in international tax refunds, we will reclaim the maximum possible refund entitlement for you. The amount of your refund will depend on a number of factors including your gross income, the length of your stay, the amount of tax deducted and how you apply. As specialists in UK tax refunds, we will guarantee to organise the largest possible refund for you. We are the only tax refund service that will obtain replacements for you. Please note that this will cause a delay in the refund process.
Yes, although we have found that the majority of people who work in the UK prefer to use our service because the process of reclaiming tax in the UK is extremely complicated and time consuming. Additionally, as specialists in international tax law, we normally reclaim a higher refund amount. If you live and pay tax in the UK you must declare rental income from overseas property lettings on the foreign pages of your tax return. If you pay foreign tax on the income, you can usually get credit for this against the UK tax you have to pay on it.
You have to declare any income you get from overseas property lettings on the supplementary foreign pages of the Self Assessment tax return. If you're in the UK for 183 days or more in a tax year, you're a resident for that year for tax purposes.
If you come to live in the UK permanently or to remain for three years or more you're resident from the date of arrival. You are also treated as resident if you're in the UK for an average of 91 days or more in a tax year (worked out over a maximum of four consecutive tax years). You will have to pay tax on the income from the letting whether or not that income is brought into the UK. This is known as the arising basis of assessment. You can deduct the same expenses and allowances from overseas property letting income as from UK property letting income, including travel costs. (The expenses must be solely for running your property letting business.) Because all overseas property lettings are treated as a single business, losses from one overseas property are automatically offset against profits from the others.
In addition, if you make a loss overall, you can offset it against future years overseas rental profits.
Corporation Tax is a tax on your company taxable income or profits. The current rates are available on the Rates and Allowances page. You must tell us that your company exists and that it is liable to tax. The word company is also used to include: members' clubs, societies and associations, trade associations, housing associations, groups of individuals carrying on a business but not as a partnership, (for example, co-operatives.) What you have to do: for Corporation Tax, companies: have to work out their own tax liability, have to pay their tax without prior assessment by the Inland Revenue, and are liable to penalties if they do not deliver a return by the statutory filing date, normally 12 months after the end of the accounting period.
Corporation Tax is due for 'Accounting Periods' which are normally 12 months long. Accounting periods can, in some circumstances be shorter than 12 months but never longer.
Bookkeeping & Accounting: We can relieve you and your staff of an enormous burden by taking care of all your bookkeeping and accounting needs, including the preparation of your annual accounts. You can choose as many of our services as you need. Here's what we offer: Accounting Debtor chasing and management Supplier reconciliations and payments Processing cheques paid and amounts received Monthly bank reconciliations Full annual accounts preparation and submission as necessary Annual returns for limited companies Filing accounts with Companies House We are charging a £150.00 fee for Bookkeeping & Accounting (40 invoices per month)
Payroll
£ 80.00
Payroll: Administering your payroll can be time consuming and burdensome, diverting energy and resources from the core activities of your business. We have dedicated staff who can relieve you of this burden by providing a comprehensive and confidential payroll service, including: Customised payslips Administration of PAYE, national insurance, statutory sick pay, statutory maternity pay, etc Completion of statutory forms, including year end returns, to issue to your employees and submit to the Inland Revenue Summaries and analyses of staff costs Administration of pension schemes Payroll reporting individually designed to suit the business needs Preparation and submission of all year end reports We are charging a £80.00 fee for Payroll preparation (5 Employees)
VAT Preparation
£ 70.00
VAT: Value added tax is one of the most complex and onerous tax regimes imposed on business - so complex that many businesses inadvertently overpay or underpay VAT. We provide an efficient cost effective VAT service, which includes: Assistance with VAT registration Advice on VAT planning and administration Use of the most appropriate scheme VAT control and reconciliation Help with completing VAT returns Planning to minimise future problems with Customs and Excise Negotiating with Customs and Excise in disputes and representing you at VAT tribunals SFiling accounts with Companies House We are charging a £70.00 fee for VAT Preparation (1-20 invoices per month)
UK COMPANY REGISTRATION SERVICE. REGISTERING COMPANY IN THE UNITED KINGDOM
Welcome to Coddan online UK company registration agent website. We offer electronic British company registration and electronic filing of documents. Your English and Scottish company is registered electronically as soon as we receive your details (and payment) it could not be done any more easily or quickly. We review your choice of company name etc and Companies House make a number of checks (to verify the registered address details etc) and your company is registered as soon as this process is complete. It can take three hours, it may take twenty-three hours, it all depends on how busy Companies House staff and systems are. We send your package to you by first class recorded delivery, as part of the service. We also offer Nominee Company Secretary and Registered Office facilities in addition to UK company registrations.
We will register your new company in the United Kingdom with your intended directors, company secretary, registered office and shareholders all in place and recorded at Companies House at the time of registration, although we can of course still use our nominees for incorporation purposes if you prefer. We complete all the minutes, statutory registers and official documents on your behalf, and ensure that all necessary forms and resolutions are correctly filed with the Registrar of Companies.
Our Service
We provide a fast online service for company registration, LTD company formation, and business incorporation in England, Wales and Scotland. When first setting-up a business there are many issues to consider. You need to decide whether or not to incorporate your business, and to choose a structure for your business. There are several types of legal business entities which you can choose to operate as. For more information on these choices, follow the links below. We advise that professional legal and financial advice is obtained before a final choice of business entity is made.
Coddan is a leading service provider in the field of English, Scottish and Irish company formation and company registration. We can help you in starting a business in England & Wales Scotland and Northern Ireland. Over 95% of our companies are incorporated within 6 hours. The electronic submission of information enables a fast company start-up satisfying all of the required legal formalities: a director, a secretary, a registered office and shareholders. Our electronic filing software has been approved by Companies House.
Live Help: Live Help is a real time "chat" feature which enables you to interact with a customer service representative without a phone call. Get answers to your questions while using our website. Clicking the "Live Help" button will start an on-line session with one of our representatives. Live Help is currently available during normal business hours. Outside of the above opening hours, our business center will be closed. When you click on the button, you will see an e-mail form that will allow you to send us a mail with your questions. Live Help is free! There are no hidden fees. We offer the service as a courtesy to our website visitors.
Dear visitors, while having a chat session with a customer, we are frequently requested to give a piece of advice on tax planning or business structuring. We would like to inform you that it is against our principles to provide online advice pertaining to these issues. The points that may be covered during a session include service description, package or service price, navigation at our website, ways of making an order, methods of payment etc. Yet, if you wish us to provide you with advice on tax or business structuring, you should be aware that this service is chargeable.
We accept phone orders during normal business hours. Credit cards are the preferred method of payment; we accept VISA, MasterCard and Delta. We can accept payment in UK Pounds Sterling, US Dollars, Euros, Australian Dollars and Canadian Dollars. If you call and receive voicemail, just leave your name and number, as clearly and as possible, and we will call you back as soon as possible.
Monday - Friday: 9:30am to 17:30pm Saturday: (offices are closed) Sunday: (offices are closed) Holidays: (offices are closed on all recognized UK holidays).
Money and Payment Policy: Coddan accepts all major currencies. We accept Visa, Visa Electron, Visa Purchasing, JCB, MasterCard, Solo, Switch and Delta. We do NOT charge "surcharges" for credit card transactions. If you do not feel comfortable transmitting your credit card number and other information on the Internet, we suggest you place an order online, choose "Credit Card via Phone" as the payment method, and then phone in to give us your credit card number over the phone. We will charge your credit card manually. Pre-payment with cashier's check or money order is accepted. We accept wire-transfer from anywhere. After you place your order, details about the wire-transfer process will be e-mailed to you on the second e-mail notification. If you missed that e-mail, please call our toll-free number that is given on the order confirmation.
INCORPORATE IN THE UK:
Did you know? The UK is the most favoured inward investment location in the European Union. The UK attracts around 40% of all US investment in the European Union. Around 45% of UK outward investment goes to the US. About one million Britons are employed by American companies and about one million Americans are employed by UK companies. London is host to more major international corporations than any other European country (It is the HQ of 130 out of the world's top 500 companies).
Historically the UK has depended on international trade more than most countries. These traditions are reflected today in policies welcoming inwards investment and stimulating exports. These policies have resulted in the increasing pre-eminence of the UK among European countries, especially in high technology areas, as a centre for investment for North American businesses expanding into Europe. Also important are the other natural relative advantages of language (especially) and the similarities in many respects between the UK and the USA of business patterns and practices, legal systems and institutions.
These notes are only intended to give an outline guide to some of the current UK legal and regulatory issues which are relevant to overseas companies doing business in the UK and are by no means exhaustive. The legal system in the United Kingdom is both common law and statute based. The UK comprises three separate jurisdictions, England and Wales, Scotland and Northern Ireland. Whilst the laws are similar in each jurisdiction, they are not identical. The information contained in these notes is based entirely on the law applicable in England and Wales.
The UK is also one of the 25 member states of the European Union ("EU"). The rules of the EU (which was established by the Maastricht Treaty which added two so-called "pillars" dealing with foreign and security policy and justice and home affairs to the existing economic and monetary pillar embodied in the European Community Treaty) are contained primarily in these and other treaties, and in legislation made by various European institutions, such as the Commission, under these treaties.
One of the fundamental principles which lies at the heart of the European legal order is that European law has priority over any conflicting law of the member states. As a result national courts of the member state are not only bound to apply European law, but may not give effect to any national law which is inconsistent with applicable EU rules. EU law is therefore an integral part of the law in the UK.
The UK used to pride itself on being a lightly-regulated jurisdiction, in which if a matter was not prohibited by specific law, it could be regarded as permitted, subject only to the general controls of the common law. That proposition has become increasingly tenuous in the commercial arena, primarily as the UK has been required to adopt into national law, certain mandatory EU Directives. Much of the new regulation relates to specific industry sectors, and is therefore outside the scope of these notes, but some examples are set out below:
UK LTD Companies from only £32.00! All Inclusive Company Registration. Each limited company package includes all statutory paperwork and is fully compliant with company law. All our private UK companies are general trading companies and can be used to conduct any type of business. A Certificate of Incorporation, and the Memorandum and Articles of Association of your company will be sent to you upon formation of your company. You can appoint your own directors and secretary BEFORE company incorporation. This is absolutely FREE. Our 4-8 hour online incorporation service enables you to register your company quickly and effortlessly. All government and filing fees are included in the cost of our E-Quick pack. All certificates and documents will be sent directly to you via email immediately following the formation of your company. It will take just 5 minutes to complete the online registration form, then your company could be up and running within 4-8 working hours.
THE E-QUICK PACKAGE CAN BE UPGRADED WITH ANY OF THE FOLLOWING FEATURES:
1. Company Pliers Seal - £20.00. 2. Laminated Hard-copy of the Certificate of Incorporation - £5.95. 3. Laminated Hard-copy of the Certificate of Incorporation, Bound Copies of the Memorandum & Articles, and Combined Company Register - £12.95. 4. Domain Name Registration for two years - £16.00. 5. Provision of a Registered Office Address for 12 months - £50.00. 6. Provision of a Nominee Company Secretary for 12 months - £49.95. 7. Certificate of Good Standing - £35.00. 8. Notarisation & Apostille of Documents.
Contract Terms: Attempts to limit or exclude liability are regulated under the Unfair Contracts Terms Act 1977, unless the contract is "a contract for the international sale of goods". A contract term or notice will be void if it seeks to exclude or restrict liability for death or personal injury caused by negligence. Limitations or exclusions for other types of loss are not prohibited, unless they are contained in written standard terms of business, in which case they must be reasonable to be enforceable.
The Sale of Goods Act 1979 (as amended), the Supply of Goods and Services Act 1982 (as amended) and other associated legislation contain terms which are implied into contracts for sale between a seller and a consumer in the UK. These include that the goods must be fit for their intended purpose, must conform with their description and must be of satisfactory quality. These implied terms may however be excluded if the agreement is a "contract for the international sale of goods", which is narrowly defined in the relevant legislation.
Under the Unfair Terms in Consumer Contracts Regulations 1994 a contract deemed unfair may be completely void and unenforceable against a consumer. In particular, the statutory implied terms referred to above cannot be excluded in consumer contracts and can only be excluded in other contracts if the exclusion is reasonable.
Consumer Credit: The Consumer Credit Act 1974 requires most businesses that offer goods or services on credit or lend money to consumers to be licensed by the Director General of Fair Trading.
Data Protection: Any legal entity which holds personal data must comply with the Data Protection Principles set out in the Data Protection Act 1998 and in most cases should notify to the Office of the Information Commissioner what data it holds, and for what purposes.
Distance Selling: The sale of goods and services to consumers by distance communications (including telephone sales and e-commerce) is tightly regulated and relevant legislation includes provisions relating to the right of consumers to cancel contracts, and statutory requirements for the provision of certain information to the consumer.
Human Rights and Commercial Activity: Although the legislation is aimed at public bodies such as government agencies, the fact that the courts of England and Wales are subject to its provisions, means that in practice businesses and individuals can claim rights under the Human Rights Act 1998.
Late Payment of Debts: All commercial traders are entitled under the Late Payment of Commercial Debts (Interest) Act 1998 to claim interest on late payment of debts from other commercial traders (currently at a rate of 8% above Bank of England base rate).
Advertising Content: Although the UK has only light regulation of what in Europe is often termed 'Unfair Competition' (such as comparative advertising campaigns), the Advertising Standards Authority has extensive powers to investigate complaints about claims made and other content in advertising and marketing materials.
Promotions and Lotteries: There are complicated regulations governing games and competitions and the offer of prizes to consumers.
Guarantees: Sale and Supply of Goods to Consumers Regulations 2002, place a statutory obligation on the seller or the manufacturer to repair or replace or to give a full or partial refund (depending on the circumstances) for goods which do not conform with description or are unfit for the purposes of the consumer. The time limit on this obligation is up to six years from the date of delivery, and in the first six months after delivery the onus is on the seller to prove that the fault was not present at the time of the sale. The Regulations do not apply to services except for unsatisfactory installation of goods. Under the Regulations, guarantees (or "warranties") offered free with a product can now be enforced through the courts.
UK Competition law has been substantially revised by the Competition Act 1998 which embodies most of the main UK legislative provisions on competition. The Competition Act 1998 brought UK competition law into line with competition law in the European Union by introducing prohibitions similar to those under Articles 81 and 82 of the EC Treaty. These provisions prohibit anti-competitive agreements and abuses of market power. Parties found to be in breach by the relevant UK authority (the Office of Fair Trading) face being fined up to 10% of their United Kingdom turnover for the year of infringement, whereas the penalty at the EU level can be as much as 10% of world-wide turnover.
As a result of the Enterprise Act 2002, engaging in certain anti-competitive behaviour (e.g. cartels and price fixing) is now a criminal offence punishable by fines and/or imprisonment. A substantial review of the procedures concerning the enforcement of European competition law has now been completed. As a result and effective as from 1st May 2004 certain enforcement powers exercised by the European Commission in relation to Article 81 and 82 of the EC Treaty will devolve to the national competition authorities of the EU member states. The Article 81(3) notification system will also be abolished.
Our Service: Our lawyers advise clients in the choice of entity to utilize for any given business venture. Such advice includes the tax advantages of the respective entities as well as the non-tax or business issues involved in each type of entity. Our lawyers continue their representation of such entities on an ongoing basis and advise the entity and its owners regarding the business issues which arise from time to time (such as labor and employment issues, tax issues, negotiating contracts, securities issues and licensing and regulatory matters).
Our lawyers also represent many entities which are involved in negotiating mergers with other entities or acquisitions of other entities. This representation includes advising the business and the owners on the purchase or sale of a business and on tax-free mergers or other reorganizations of business entities, as well as structuring divisions of an existing entity into two or more new entities. We structure a variety of commercial lending transactions including corporate loans, real estate development loans, asset based loans, agri-business loans, floor plans and home builder lines of credit.
Members of our firm advise financial institution clients and their corporate counsel on a daily basis with respect to general lending issues including those relating to UK and Cyprus documentary stamp and intangible taxes, bankruptcy and creditors' rights, environmental concerns and problem loans. We have extensive experience in complex loan workouts.
Our attorneys monitor the latest developments in both tax and non-tax laws affecting estates and trusts and lecture extensively on those subjects around the country to numerous professional groups and organizations. The firm's Trust and Estate attorneys are proficient in analyzing and implementing the latest techniques to reduce estate and gift taxes, including, for example, family limited partnerships, GRATS and charitable remainder and lead trusts.
General Advantages of UK Private Limited Companies:
1. Liability is, in the vast majority of cases, strictly limited to the investments made by the shareholders. 2. Company Officers are not personally liable for their actions unless there is a clear and serious breach of their fiduciary duty. 3. Limited companies often benefit from greater prestige than their sole proprietorship or partnership counterparts. The reason is because such an enterprise normally requires more planning and thus is deemed more credible. 4. Limited companies often benefit from significant tax advantages. In fact, many countries around the world give exclusive tax incentives to this type of entity. 5. The rights of shareholders are normally clearly defined and protected. 6. Corporate taxes only become payable after the end of the financial year. This means money that would otherwise be taxed on a monthly or quarterly basis, is available to earn further interest before the final payment of tax. 7. You need only appoint one Director and one Shareholder. 8. Directors can be corporate bodies or private individuals. 9. A Director can be of any nationality. 10. All companies must appoint a company Secretary who can be of any nationality.
The firm's Trusts and Estates attorneys also advise our clients on the income, gift and estate tax consequences of charitable gifts; handle the negotiation and preparation of marital agreements; provide asset protection planning for individuals; and have extensive experience in the establishment of private and publicly supported charitable organizations, international estate planning and estate and trust litigation, as well as post-mortem tax planning. We recognize that a client's estate planning needs and matters that arise in the course of estate planning and administration frequently require expertise in other areas of the law, and we work closely with the firm's attorneys in other practice areas, including litigation, real estate, corporate and tax, to provide our clients with thorough legal advice.
UK TAXATION FOR NON-UK RESIDENTS:
A person's domicile is the country that the individual regards as his or her natural home. Each person has only one domicile which is normally but not always the country of birth; it can be changed. Ordinary residence is the country where a person normally lives or makes habitual visits, ie visits of three months or more a year over four consecutive years. Residence in the United Kingdom is normally established by someone who visits the UK for at least six months in any one tax year, or three months a year over four consecutive years.
Non-UK source income. Non-UK income is taxed broadly as follows:
UK residents pay tax under Schedule D Cases IV and V on income from overseas trades, professions, property and investments. Income is calculated similarly to United Kingdom income. UK residents who are non-UK domiciled or are UK or Eire citizens not ordinarily resident in the UK, pay tax only on income brought into the UK (remittance basis). Employees who are United Kingdom resident and ordinarily resident pay tax under Schedule E on remuneration from non-UK duties of their employment, in addition to their UK remuneration.
Employees who are not ordinarily resident in the United Kingdom, and UK resident non-domiciled employees working wholly abroad for a non-resident employer, pay tax on their overseas remuneration on the remittance basis. Non-UK residents are NOT NORMALLY liable to UK tax on overseas income.
Non-UK residents generally pay tax on their United Kingdom income. Tax may be deducted at source from property income. Only certain non-residents are entitled to personal allowances. They include all Commonwealth citizens, all nationals of European Union states, Norway, Iceland and Liechtenstein and all residents of the Channel Islands and Isle of Man. The United Kingdom income tax liability of a non-resident is subject to an upper limit. The calculation is complex but the broad effect is that no tax is charged on UK bank and building society interest and state pensions paid to non-residents provided they do not claim any personal allowances.
UK CORPORATE TAX REGIME:
UK corporation tax is charged on the worldwide profits (income plus gains) of any company that is resident in the UK. A company is UK resident if it is incorporated in the UK or if its centre of management and control is in the UK. If a company has a majority of UK resident directors it is likely to be UK resident, although the test is where management is actually exercised.
CORPORATION TAX RATES (2006):
Profits less than £10,000 - 19%.
If profits lie between £10,001 and £50,000 - 19%.
Profits between £50,001 and £300,000 - 19%.
Profits between £300,001 and £1,500,000 - 32,75%.
Profit from £1,500,000 - 30%.
So, in the spring 2004 budget IR591 gave birth to the so called "non corporate distribution rate" of Corporation Tax - the 0% rate was left in place, but a minimum 19% tax was imposed on monies drawn as dividends by individuals (as opposed corporate shareholders). Basically this was a face saving exercise by the Government to remove the 0% band without being seen to have got it wrong in the first place. The problem was the NCD rate was not properly thought through and created various anomalies and pitfalls, not in the least that the minimum 19% tax rate was, in fact, nearer 16%. All in all a bit of a rushed bodge up.
BASIS OF CORPORATION TAX CHARGE:
The computation of taxable profits consists of disallowing certain items of expenditure, most notably capital items, depreciation and entertaining. In place of depreciation a capital allowance is given on most plant and machinery at a rate of 25% on a reducing balance basis. Plant and machinery includes items such as furniture, computers, and most shop fittings. Depending upon the size of the company and the type of expenditure first year allowances ranging from 40% to 100% of qualifying expenditure may be available.
Buildings do not generally attract capital allowances although a 4% allowance is given on factories and hotels. Expenditure in respect of certain types of innovative research and expenditure may qualify for enhanced tax allowances equivalent to 125% or 150% of the expenditure actually incurred dependant upon the size of the company.
TRANSFER PRICING:
Transfer pricing rules allow the UK tax authorities to dispute the price charged for sales between connected parties and to tax the parties as if the transactions were at an open market price. In the US the IRS has similar powers and it is therefore important that any charges between a UK and a US company can be justified as commercial pricing.
As the UK corporation tax system is one of "self assessment" the onus is on the company to have their inter group pricing arrangements documented in a fashion that supports the contention that they have been set using the arm's length principle (i.e. that the terms are identical to those which would have been agreed between two unconnected parties when undertaking transactions with similar conditions).
The transfer pricing rules extend to the area of "Thin Capitalisation". In this area the UK tax authorities can disallow interest paid to an overseas parent to the extent that inter company borrowing exceeds that which would be commercially available from a bank. A subsidiary will therefore normally need to be funded by a mixture of share capital and inter company debt. There are no absolute rules on what constitutes thin capitalisation. The UK tax authorities will try to take a commercial view of what an independent lender, such as a bank, would be prepared to lend the business, taking into account such factors as security, interest cover etc.
UK PERSONAL TAX REGIME:
Individuals are chargeable to income tax on their worldwide income if they are UK resident. However, for individuals who are not UK domiciled, i.e. they do not intend to remain in the UK indefinitely, special rules apply. A non-UK domiciled individual is only taxable on overseas income and gain to the extent that the money is brought into the UK. The rules in respect of domicile are currently under review and significant changes to the basis of taxation for non-UK domiciled individuals are widely expected.
UK PERSONAL TAX REGIME(2004/5):
First £4,615 - nil.
Next £1,960 - 10%.
Next £28,540 - 22%.
Remainder - 40%.
There are few allowable deductions for individuals. Capital gains tax is charged at the individual's highest rate of tax on disposals of capital assets. However, business assets (most commonly shares in a trading company in which an individual works) benefit from taper relief which will generally reduce the effective rate of tax on any gain to 10% after two years of ownership. It may be possible for a non-UK domiciled individual to avoid capital gains tax on the disposal of shares in a UK company if they are held in an offshore trust. However, this structure may not be effective for US tax purposes.
Inheritance Tax ("IHT") is charged at 40% on death and at 20% on certain lifetime transfers. Each individual has an exemption, currently £255,000 below which no tax is payable. Individuals domiciled in the UK are subject to IHT on their worldwide assets whereas non-UK domiciled individuals are generally only subject to IHT on their UK assets. There are a wide range of exemptions and reliefs which may be available to mitigate IHT charges.
National Insurance is a payroll tax used to fund the Welfare system. It consists of both employers and employees contributions. The employee suffers a deduction of some 11% of salary, on amounts between £89 and £595 per week and 1% on salary in excess of £595 per week. The employer pays 12.8% of salary in excess of £89 per week but with no upper limit.
DO I NEED TO REGISTER FOR VAT?
There are two main concerns, when deciding whether or not you need to register for VAT. The first, is whether your business is actually allowed to register for VAT. Some businesses cannot register, specifically, those that offer exempt services or supplies. If you are allowed to register, then you will need to monitor your company's turnover. If this has increased above the lower limit of £56,000 in any running 12 month period, then you should register immediately. This also applies if you expect to achieve a turnover above this limit. Failure to register can mean incurring penalties and fines.
HOW DOES PAYE AFFECT ME?
P.A.Y.E. stands for Pay As You Earn and is a government scheme to collect tax from UK taxpayers. With P.A.Y.E. the onus is put directly onto the employer to administer the deduction of the correct amounts, and failure to do so can result in fines and penalties. In many cases, if tax is mis-calculated, the shortfall is requested directly from the business or business owner, and not the individual employee. The tax itself is calculated on whatever basis the employee is paid, i.e. Weekly or Monthly, and a basic allowance is given to each individual in each tax year (6 April - 5 April).
Once this allowance is used up, tax is paid on the remaining amount at a given percentage as set by the government. This percentage is on a sliding scale, and is often described as lower rate, basic rate and higher rate tax. Those who pay higher rate tax can often make better use of the tax breaks given to pension contributions and other allowances, and it often makes good financial sense to discuss your situation with a tax expert.
OWNER-MANAGED COMPANY TAX PLANNING – 10 TIPS
1. Company Tax Rate: Consider pre-year end tax planning reviews (or ask your accountant!) to reduce the company's effective tax rate, particularly if the company's profits may be liable to corporation tax at significant levels (e.g. capital expenditure, pension contributions). If this is not possible, consider post-year end tax planning (e.g. the carry back of trading losses, or the payment of bonuses within nine months following the end of the accounting period). Corporation tax rates can be higher, depending on the number of active "associated companies". Check this point with your advisers if in doubt.
2. Profit Extraction v Accumulation: What are your income requirements? Could profits be retained for future use in the company's business (e.g. with a view to taking advantage of business asset taper relief when the business is later sold or wound up)? Consider the potential implications of profit extraction v accumulation, such as the effect on pension contributions and tax credits.
3. Extracting Profits: Check whether funds are being extracted in the most tax-efficient way (e.g. salary, dividends, tax and National Insurance efficient benefits in kind, rent on personally-owned assets, interest on loans to the company). Does the 19% minimum non-corporate distribution rate (or "dividends tax", as it is often called) potentially apply to profits distributed? If dividends are paid, ensure that all the paperwork is correct, and that payments are made out of distributable company profits (the latter being a company law requirement).
4. Loans from the Company: If your company is closely-controlled (e.g. by five or fewer shareholders), are any close company loans to "participators" (e.g. shareholders) outstanding at the end of the accounting period? The most common type of loan is an overdrawn director's current account with the company. Consider the potential tax implications of loans if you are a director shareholder (not to mention the company law implications!) and check if any possible planning alternatives exist (e.g. a loan repayment or waiver within nine months following the end of the company's accounting period).
5. Anti-Avoidance: Consider whether HM Revenue & Customs could challenge any "arrangements" involving the business owners etc under the ‘settlements’ anti-avoidance rules, if tax savings have resulted. Such arrangements can include dividend waivers and disproportionately large returns on share subscriptions. Other anti-avoidance rules to consider include the "IR35" personal service company legislation, which affect "relevant engagements" performed through such companies. Seek expert professional advice if in doubt.
6. Capital allowances: Small and medium sized companies are generally eligible for a "first year allowance" of 40% on qualifying expenditure on plant and machinery. However, certain capital costs qualify for a 100% first year allowance, such as expenditure on energy saving plant and machinery. In addition, certain "low emission" cars attract a 100% first year allowance, whilst only attracting low benefit-in-kind charges for a director or employee.
7. Taper Relief (CGT): If you are a shareholder, check the capital gains tax taper relief status of your shares in the company with your tax adviser. Is the company "trading" for taper relief purposes? Or does the company carry on substantial investment activities? Do you potentially qualify for full business asset taper relief (i.e. reducing the effective tax rate to around 10% for a higher rate taxpayer)?
8. Business Property Relief (IHT): Check with your tax adviser about the conditions for this potentially generous relief, including the company's status. For example, is the company wholly or mainly trading? Is the relief potentially restricted in respect of "excepted assets" (e.g. surplus cash or investments)? Are the shares subject to a "binding contract for sale"? Your adviser should be familiar with these relief conditions.
9. Exit Planning: Is a company sale a possibility in the future? Consider your tax position as a business owner (e.g. will a disposal qualify for full business asset taper relief)? Contrast the tax position if the company's shares are sold, with the alternative that the assets are sold and the company is wound up. Ask the company's tax adviser about the implications of an informal winding up under Extra Statutory Concession C16, which can be very useful on a sale of company assets rather than shares.
10. Succession Planning: Will the company's shares be passed on to family members? Consider lifetime planning (e.g. transferring shares into trust for children or grandchildren), and estate planning for inheritance tax purposes. Do you have a current Will? How will the shares be dealt with on retirement or death?
DIVIDENDS AND OWNER-MANAGED BUSINESSES
For many private company owners, extracting income by dividends rather than salary or bonus will often be more tax-efficient. However, before dividends can be considered as a strategy for extracting profits from the family trading company, the Companies Act requirements for lawful dividends must be addressed. Failure to address those requirements could result in the dividends breaching company law. This can also give rise to some unfortunate tax consequences.
Lawful and Unlawful Dividends: Lawful dividends are broadly those that comply with Company law requirements. Company law issues relating to family company dividends include checking whether the company's Articles of Association permit directors to declare dividends. In addition, it is necessary for the company to have sufficient distributable profits for dividends to be paid. Profits available for distribution are identified by reference to 'relevant' accounts (Companies Act 1985, s 270). These will normally be the company's last annual accounts (s 271), except where the last accounts show insufficient reserves to legally declare the dividend. 'Interim accounts' (s 272) or 'initial accounts' (s 273) may be required in those situations.
Initial accounts may be appropriate for new companies intending to pay an interim dividend in the first accounting period, to enable a reasonable judgement to be made in determining amounts available for distribution (i.e. by reference to profits, losses, assets, liabilities, provisions, and share capital and reserves). Properly prepared, up-to-date management accounts may therefore be necessary if dividends are to be paid in the first accounting period. If the directors have properly followed the Companies Act requirements for distributions, the dividend payments will be lawful, even if the annual accounts subsequently show insufficient distributable profits.
An 'innocent' shareholder in receipt of an unlawful dividend is not generally required to repay it. However, company law requires a shareholder to repay the dividend if he knows or has reasonable grounds to believe that the dividend was unlawful (Companies Act 1985, s 277(1)). The time limit for recovery of dividends from the shareholder is generally six years from the date of declaration or its declared payment date, whichever is later (Limitation Act 1980, s 5).
In family or owner-managed companies, problems often arise if interim dividends are paid during the accounting period. When the company's annual accounts are prepared, it may transpire that the company had insufficient distributable reserves to cover the dividend. It could be argued that the director shareholder knew, or had reasonable grounds to believe, that the dividend was unlawful. In HMRC's view CA 1985, s 277 will apply 'in the majority of such cases' (CTM 20095, para 28).
Tax Consequences: There are a number of potential tax implications of unlawful dividends in such circumstances. For income tax purposes, the dividend is treated as void, and the shareholder is not treated as having received a distribution. In the case of a close company, HMRC would probably argue that the dividend represents a loan to a participator, on which the company is liable to a 25% charge under TA 1988, s 419. However, relief is available (under s 419(4)) if the dividend is subsequently repaid.
Alternatively, if the shareholder was unaware and had no reasonable grounds to believe that the dividend was unlawful, the dividend should be treated as a distribution for income tax purposes, and the shareholder will not be treated as a constructive trustee.
Problems can also arise if dividends are not properly declared or paid. In many small private companies, there is often some confusion over whether a dividend is interim or final, and when dividends are actually 'paid'. Final dividends are normally treated as paid on the date of the resolution approving the dividend, unless a future payment date is specified. It should therefore be relatively straightforward to ascertain the date of payment. However, in the case of interim dividends being credited to a director's loan account, HMRC consider that payment is not made until an entry is made in the company's books. The Company Taxation Manual (CTM 20095, paragraph 8) states:
"A dividend is not paid and there is no distribution, unless and until the shareholder receives money or the distribution is otherwise unreservedly put at their disposal, perhaps by being credited to a loan account on which the shareholder has the power to draw."
This crediting often takes place in a later accounting period than the directors' resolution to pay the interim dividend, such as when the company's year end accounts are prepared. A practical planning point is therefore to ensure physical payment of dividends to shareholders immediately after their declaration (e.g. by cheque), followed by the re-introduction of those funds to the company with a corresponding credit to the loan account.
Tax Planning
UK: Income Tax
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