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Income Tax Questions
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Business drawings or salary? - USERNAME: taxexplorer
Tax Question: A new client, sole trader, has wife as employee. The accounts show undrawn salary on the balance sheet covering old accounting periods and hence HMRC not allowing a tax deduction. However, the sole trader accounts also show drawings in the years concerned. We feel that the previous accountant did not think about setting off the drawings against salary first. Wife's salary is within her personal allowance, so no additional income tax/NI. Hmrc are currently arguing to disallow the undrawn salary, which, on the face of it is right if we look at the accounts as they are. But I would like to argue that the salary has been paid via the drawings (so there should be no undrawn salary on the balance sheet). In a limited company scenario where director extracts cash through directors current account but no paperwork involved, HMRC would construe payments as salary first. Would you know of something where hmrc have argued for salary treatment on drawings? Or is there any case law that we can use to say that the drawings are in fact salary and the previous accountant made a simple mistake? Thank you. . . .
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Issue of shares and income tax/CGT - USERNAME: taxexplorer
Tax Question: Hi One director, shareholder (H), of a limited company would like to bring on, as shareholders, his wife (W) and his sister (S). Both W and S are employees of the company. I feel there are two ways of doing this: 1) H holds 100 shares (of £1 each). H gifts 25 to W and sells 24 to S at market value. H retains 51 to keep control of the company. Question: For H, W and S to take out the same amount of dividends annually, would it be possible for H to disclaim half of his dividends (in which case the cash stays in the company) on an on-going basis? Are there any implications in this, especially with the Artic case? OR 2) The company issues 99 A Shares (of £1 each) each to W and S, with dividend rights but voting rights of 1 for every 2 shares. This way the same level of dividends can be declared and H has effective control of the company with regards to voting and asset rights. Can A shares be issued at £1 where S is involved? Are there any risks in this? I think that entrepreneurial relief would be maintained as all are working in the company and have 5% of the voting rights and share capital. 3) Or is there any other way of doing the above? Thank you. . . .
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Income tax and an usufruct - USERNAME: tonio19
Tax Question: Hi, I am a UK resident and own shares of SCPI (Societe Civile de Placement immobilier) in France, which give me rental income, and are taxed as at my marginal income tax rate in the UK ( I get to deduct the tax paid in France). Looking forward, I am looking to buy the usufruit (usufruct) of SCPI shares for 10 years, effectively buying the SCPI at a discount but not receiving any income for 10 years (the person buying the usufuit is himself liable to income tax on the rental income). Am i liable to any income tax myself under HMRC? Thanks . . .
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Tax implications of disclaiming capital allowances - USERNAME: Amji
Tax Question: When computing capital allowances if some of the allowances are restricted for any reason and not claimed in full ,Can the unclaimed allowances be claimed in the following year together with the normal writing down allowances ? For Example: WDV bfwd 20000 Wda Entitlement 5000 Wda Claimed 2000 Wdv Cwf 15000(20000-5000) (total unclaimed allowances cwfd (5000-2000)=3000 And in the following year : Wdv Bfwd 15000 Claimed 3750 Wda carried forward 11250 Total allowances claimed in this period(£6750) (3750+3000Unclaimed from last year) Is This possible please ? . . .
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Using an offshore (Seychelles) company for non dom tax planning - USERNAME: Fredrik
Tax Question: I am a Swedish national resident in the UK since 4 years back. I am not domiciled in the UK. I am employed in the UK. I have my own firm in the UK (which is currently not profitable and I am not receiving a salary). I also have an income stream from consultancy work in Sweden. I would be interested in moving the Swedish income stream off-shore to perhaps the Seychelles where I could charge the consultancy fee from the Seychelles company. Are there any UK tax implications by doing this? For my own firm in the UK, I would like to sell the trademark rights to the brand and pay royalties to the off-shore firm, e.g. Seychelles. Is this ok from a UK tax point of view? My own firm trades between China and the UK and is expanding globally. Could I organise the business so that all non-uk transactions and cash flow are between the off-shore firm and the clients? Can I introduce the profits to the UK from my off-shore company in e. g. the Seychelles? Above are some questions. . . .
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Tax return 2011: Claiming losses in an LLP partnership - USERNAME: lucas0987
Tax Question: Tax return 2011: Claiming losses in an LLP partnership I have losses brought forward from an LLP partnership in the 2009 tax year and have ceased to be a partner in the 2011 tax year. The only tax year I did not have employment income was 2010. Can I claim loss relief against my employment income now? Can I claim it in my tax return or do I write to HMRC? What is the name of the loss relief? Should I have claimed it previously or now that I have ceased to be a partner? . . .
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Granting a lease to a connected company - USERNAME:kash
Tax Question: Can I grant a lease of my personal rental property to my limited company. The lease would in effect be a full repairing and insuring lease. The limited company could sub let the property and record any income received but would also be responsible for the associated costs. . . .
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Claiming a tax deduction for legal provision -
USERNAME: amji
Tax Question: A client of mine ran a post office till 2010.In 2010 one of the staff stole some money and my client now is being asked by the Post office counters Limited to compensate for the loss. My client was then decided to sell the post office and ceased to trade . Can this loss (stolen money ) be treated as terminal loss and carried back? I will have to accrue the loss as My client is still fighting a legal battle with the Post office Counter Limited that it was not his fault and that the money was stolen by his employee and not by him. The chances are that my client are going to lose this legal case and will be asked to pay . Can I accrue this loss and carry the losses back ? My client will be quite happy to pay the tax if it turns out that he wins the case in the year the case is decided. Thanks as always for your valuable advice. . . .
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Reducing tax on disposal of property owned by Ltd company - USERNAME: Gem
Tax Question: I own a commercial property through a Ltd company in which I own 100% of the shares the company owns no other property and has no employees. I am the Director & Co. Secretary. The property is let to a third party tenant. The company was set up in the year 2000 specifically to purchase the commercial property. I expected to be able to take advantage of the old CGT taper relief scheme and or reinvestment relief because the property was let to a 'trading company' as I understand things even though my company was not a trading company the fact that the property was let to a trading company was enough for it to be a 'qualifying company' In April 2008 the situation changed (I believe) and now taper relief has been abolished letting to a trading company does not allow my company to be a qualifying company for the new 'Entrepreneurs relief'or any kind of reinvestment\rollover relief. I paid around 225K and estimate that the property is now worth around 950K and I would expect to want to reinvest a substantial amount of any gain. My questions; 1)Am I right about the changes as described above. 2)Am I disqualified from any and all types of CGT relief since 2008 3)Would the Inland Revenue make any allowances for the fact that my company had been a 'qualifying company'for 8 years if I sold it now. 4)If the company sold the commercial property instead of me selling the company would there be any advantage with regards to relief. . . .
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Tax position of wife as employee - USERNAME: blueshaze
Tax Question: A friend is self-employed. His wife helps part-time with the business. Her current income is £2.5K pa only comprising Bank interest and share dividends etc. If she invoices him £2,500 for work performed during the year is she now 'employed'? She would declare the £2,500 on her PAYE. Will she have to pay NIC if her total income is below £5,075? (She will not make unemployment claims). Presumably she could earn up to £5075 plus £2,500 interest/dividends before NICs are mandatory? Will he have any obligations other than paying her invoice? . . .
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Splitting rental profits between husband and wife -
USERNAME: juan-pensante
Tax Question: I understand that if you own a rental property jointly with your wife/husband/legal partner then it is acceptable to declare only 50% of your rental income on your personal self-assessment form. But is it acceptable to declare 100% of your expenses and other deductible amounts on the same self-assessment form (and 0% on the other) or must these also be apportioned using the same ratio of 50% . . .
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Purchasing UK property with non resident family member - USERNAME: shakim
Tax Question: Hi, I am looking to buy a property in the UK together with my brother in law. I am UK domiciled for tax purposes while my brother in law is non UK domiciled (he is Lebanese and living in Lebanon). Long term I intend to leave the UK and go back to my original country (Lebanon). In that respect: a) Is my brother in law subject to any UK taxes? Which ones if so (stamp duty, rental income, capital gains from sale, inheritance...etc)? How do we minimise them? b)What taxes am I subject to given long term intention? c) how best to structure the mortgage arrangement and the acquisition of the property to evidence the above setting to the UK tax authorities to minimize taxes? Thank you. Sami . . .
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Tax on issue of shares by company to employee -
USERNAME: IGCACCOUNTING
Tax Question: A business owner with 100% of the ordinary shares in his business is to allow one of his employees to subscribe for shares. The employee will subscribe for shares that give him 25%. The business is relatively new and is only just started to generate profits. What are the valuation / tax considerations for both the employee and the owner? . . .
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