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Creaseys Tax Planning Seminar Tax Planning
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Tax Planning Seminar 3 November 2009
INTRODUCTION AND AGENDA
Tim Page
Taxation calendar – When do I start working for myself?
Taxation calendar – When do I start working for myself?
Taxation calendar – When do I start working for myself?
AGENDAWelcome
• Economic Insight, Richard Jeffrey (Cazenove Capital)
• Tax Planning, Richard Holme (Creaseys)
Break
• Kathy Gore, Friends of East Sussex Hospices
• Investment Aspects, Peter Jackson (AWD Chase de Vere)
• Business Structures, Elizabeth Robertson (Creaseys)
Drinks and canapés
PLANNING TO AVOID 50%
……….. AND 60% TAX
Richard Holme
From April 2010
Income Tax
• 50% rate – income £150,000
• 60% rate – income £100,000 - £112,000
• Dividend tax : 25% 36.1%
• Trust tax: 40% 50%
Capital Gains Tax
• 10%/18% ????
KEY CHANGES
From April 2011
• 0.5% NIC hike
• (Freezing of annual pension allowance of £255,000 and lifetime allowance until 2016)
• End of higher rate tax relief on pension contributions for some
MORE CHANGES
MARGINAL TAX RATES ON INCOME
%
70
60
50
40
20
0
Mar
gin
al t
ax r
ate
50 100 150Income £’000
• Accelerate income?
• Extract cash surplus
• Borrow to extract assets
• Pay tax now …………… withdraw later
• Defer gift aid, loss claims etc
• Have a year out of UK?!
ALL IN THE TIMING
• Offshore insurance bond
• (Pension)
• Enterprise Investment Scheme
• Venture Capital Trusts
• ISA’s
• Other ‘wrappers’ ?
TAX EFFECTIVE INVESTMENT
• How long will 18% CGT last?
• Structured products
• Single Purpose Vehicles
• Collective / captive
• Investment / trading
INVEST FOR GROWTH TAXED AT 18%
• Discretionary / old A & M Trusts – 50%
(57% - income tax - dividends!)
• Also 10 year IHT charges
• Convert to life interest?
• Review future now of all trusts and remember non tax purposes
WHITHER TRUSTS?
• Affects those with income in current
or previous 2 years of £150,000 +
• No higher rate relief from 6 April 2011
• Tax charge on employer contributions from 6 April 2011
• How to fund retirement?
PENSION RELIEF – NEW REGIME
• George earns £300,000 pa and his employer contributes 3% to his pension. He puts in 5%
• Tax charge £300,000 x 3% x (50 – 20) % = £2,700 payable by George
• George only gets 20% relief on his contributions (£4,500 less tax relief)
• Additional tax £2,700 + £4,500 = £7,200
EXAMPLE
• Lower of - £20,000 and
Higher of - £30,000
- average contributions
to MP schemes in last 3 years
• Regular monthly / quarterly contributions count towards
• £20,000 and may rank for higher rate relief beyond this
if existed at 6 April 2009
PENSIONS TRANSITIONAL RELIEF TO APRIL 2011
Beryl has £1m cash and owns Burton Ltd a trading company from
which she takes a regular dividend of £100,000 as well as
£170,000 salary. She owns an investment property occupied rent
free by her mother and her investment in shares of £60,000
subscribed in her Uncle John’s company Reckless Limited has
become worthless.
She is married to Bob who works at IBM for £75,000 salary. He
supports several charities, donating £10,000 pa.
Beryl would like to gift the property to her daughter?
Bob and Beryl would like to invest more in pensions (£30,000).
TRANSFER INCOME AROUND FAMILY?
£
Offshore bond for cash 20,000 (pa)
Defer Reckless Ltd loss claim 6,000
Beryl to make charity donations not Bob 1,250
Bob makes pension contributions not Beryl 6,000
Bob has ½ dividend 5,550 (pa)
£38,800
POTENTIAL TAX SAVINGS – BERYL / BOB
FRIENDS OF EAST SUSSEX HOSPICES
KATHY GORE
BUSINESS STRUCTURES IN
THE CURRENT CLIMATE
Elizabeth Robertson
• Traditional partnership
• Limited liability partnership
• Limited company
• Hybrid structures
THE CHOICE IS YOURS………
• Commercial considerations
• Administrative burden
• Tax/NIC
• Profits ………… aim to retain or distribute?
SO WHICH IS BEST?
2009/10
Tax Company LLP
On profits retained 21% - 28% 41%
On profits distributed 41.5% - 47.7% 41%
On capital profits 21% - 28% 18%
TAX COMPARISON
2010/11
Tax Company LLP
On profits retained 22% - 28% 51%
On profits distributed 50.17% - 56.56% 51%
On capital profits 22% - 28% 18% ?
TAX COMPARISON
• Reassess the best structure for the future
• Make an LLP more tax effective?
• Use of service companies
• Corporate partners
• Or is it time to incorporate?
WINDOW OF OPPORTUNITY
• How to extract in a tax efficient way
• Dividends or bonus – cashflow and tax
implications
• Who are the shareholders?
• Effect of dividend on share valuation
CASH OUT !
2009/10
CT rate Dividend Bonus % %
SCR 41.5 47.7
Marginal 47.13 47.7
Full 46.0 47.7
40% tax payer
COMPARISON
• Buy back shares of minority investors
• Other methods – benefits, pension contributions
• More aggressive planning – the providers, risks, rewards
OTHER OPTIONS
Thank you for attending The Partners & Guest Speakers