Tax e-news / October

TAX CHARGE ON TAKING A LOAN FROM A CLOSE COMPANY – MORE BAD NEWS TO COME?

There has recently been a tightening of the rules regarding the receipt of a loan from a close company and the manner in which it is repaid. The company can be taxed 25% on the amount of a loan drawn by a shareholder which is still outstanding more than 9 months after the end of the company’s accounting period.

We now find that they are looking at a possible increase in the tax charge, from 25% to perhaps 40%. A completely different approach suggests a reduction in the tax charge to 5%, but with no tax refund when the loan is repaid. All of these changes mean it will be important to keep all directors’ loan accounts up to date in terms of identifying money in and money out, and the sources of the latter.

Directors’ loan accounts can often be an area of concern.  If you don’t fully understand the tax implications of how you extract cash from your business please contact us.

YET MORE HMRC TASKFORCES LAUNCHED

HMRC have announced 4 new taskforces that will investigate tax evasion in specific commercial and geographical sectors. The taskforces bring together various compliance and enforcement teams for what they term “intensive bursts of targeted activity”.

The new taskforces will investigate the following:

• Construction industry in London (expecting to raise £3 million)
• Security guards, bouncers and their employers in London and the South East (expecting to raise £10 million, with fraudulent VAT repayment claims identified as an increased risk in this sector)
• Second-hand motor traders in the Midlands (expecting to raise £3 million)
• Hidden wealth / “means” issues in the Midlands (also expecting to raise £3 million from comparing lifestyles to known assets)

As always, if you know anyone involved in the above sectors who are having tax concerns, please ask them to contact us for help.

EXPENDITURE WHICH HAS A DUAL PURPOSE

This has always been a major bugbear of the tax rules, as where there is both a business and a personal reason or benefit in meeting an expense, there is no tax relief on any of it. There are a few exceptions; for example, if the expense can be properly split between business and personal (motor expenses is an obvious example), you receive tax relief on the business portion.

Unfortunately, recent case law demonstrates that despite the changes in communications and the way in which people run their businesses, the courts are unwilling to apply the rule in a sensible or more up to date manner. We will always claim tax relief in the best possible way whenever business and private expenditure gets mixed, so that you do not lose out while staying within the rules.

BENEFIT OPTIONS FROM YOUR PENSION SCHEME

With annuity rates still not looking attractive for most of us, it is vital that all of the options are considered. The number of options continues to increase to ensure maximum flexibility, as in this area one size does NOT fit all! In looking at the options, the tax position must always play a large part. We can advise on this by reference to your own requirements. For example, taking benefits in some ways can create a tax hit of 55%, but in others can ensure a tax charge simply at your top tax rate.

COMPANY CAR ADVISORY FUEL RATES

These are reviewed each quarter on 1 March, 1 June, 1 September and 1 December. They have shown very little change in recent times, but the new rates from 1 September 2013 do show a modest increase (reduction for LPG) in some situations. Where a change applies, the previous rates are shown in brackets:

TAX DIARY OF MAIN EVENTS FOR OCTOBER / NOVEMBER 2013