The issue: we are increasingly speaking to business owners who have found themselves accumulating surplus cash or investments within their trading companies.
While this may seem like a great situation to be in, managing this excess cash efficiently and planning for its tax efficient use often require proper thought.
Things to think about: many clients want to use surplus cash to assist future generations and/or to provide an alternative income stream in retirement. One way to achieve this is for clients to set up a Family Investment Company (FIC). There are of course a number of tax considerations here, including whether to use a Holding Company (HoldCo) or a new company (NewCo) and how to move cash/assets tax-efficiently between companies. Inheritance Tax (IHT) planning is often a key consideration also.
The issue: Finding and retaining skilled staff is a growing challenge for many business owners and firms have to think creatively to ensure that they have access to the best talent pool.
Things to think about: Enterprise Management Incentive (EMI) schemes and growth share arrangements have become two increasingly popular ways of incentivising key employees. (click here for further articles on EMI). There are a number of tax and commercial issues to consider including valuation (approval by HMRC is needed for EMI valuations), EMI advance assurance, and employment related securities issues. Commercially clients need to think about how and when shares will be awarded i.e will performance criteria apply?
The issue: The COVID-19 pandemic has reshaped the way people live and work. This has led to important considerations related to tax residence and domicile.
Things to think about: When dealing with residence and domicile issues, individuals and businesses need to consider things like the difference in tax terms between a permanent and a temporary move and the effect on their income tax position; what happens to any assets they own in the UK (particularly UK properties) and social security implications.
For those leaving the UK, tax equalisation issues can be complex.
Domicile and deemed domicile status are also important considerations.
The issue: HMRC, is becoming increasingly proactive in its efforts to ensure tax compliance. This includes more and more "nudge" letters, as well as more comprehensive enquiries, compliance checks, and discovery assessments.
Things to consider: Taxpayers should be aware that there really is "nowhere to hide" as HMRC continues to gather wider powers to share data with third parties, such as Companies House.
Specific HMRC campaigns continue to target certain sectors, from online traders to property income and gains.
It's essential to act quickly to mitigate penalties but taxpayers and their advisers should also tread carefully so as to ensure they don’t give away more information than they need to.
The issue: Whilst the government may be talking about abolishing IHT, in the meantime, there are lots of individuals out there with significant buy-to-let property portfolios who may find themselves facing substantial Inheritance Tax (IHT) liabilities.
Things to consider: While there's no IHT magic wand to wave, it's crucial to start planning early and consider strategies which allow individuals to “reset” the seven-year clock for potentially exempt transfers. Growth shares can also present significant IHT opportunities.
The issue: Value Added Tax (VAT) is often underestimated in its complexity, with many business owners and their advisers lacking a deep understanding of VAT beyond basic VAT returns.
Things to consider: For online traders, knowing when to register for VAT can be challenging. Specific industries, such as financial services and land and property, have their own intricate VAT rules. Recent cases, like Sonder Europe Limited v HMRC and Hotel La Tour highlight the importance of staying on top of VAT case law to ensure that clients are kept informed of opportunities for VAT recovery where those may not have previously existed.
Whether your clients are dealing with surplus cash, navigating staff retention challenges, dealing with residency issues, facing increased HMRC scrutiny, looking for help with IHT planning, or grappling with complex VAT, there are always opportunities to talk to them about tax and to enhance the value of the services you offer by providing your client with informed choices.
