This time we have a new guide to directors' service contracts. Directors should have service contracts according to the Companies Act 2006. Somewhat confusingly (for everyone, I imagine and not just us tax folk) section 188 of that act considers that there is an "employment" created by a director's service contract. Some rather careful thought is required as to what goes into a director's service contract; do you really want to create an actual employment for tax, or not?
I have also just been reviewing an interesting case involving Glapwell football club and loss relief. Relief was denied because the club, although operating on a commercial basis, did not have a reasonable expectation of making a profit. I can't help noticing that we have had a run of cases featuring sports and sporting organisations over the last couple of years (easy pickings for HMRC?) and this is the second one in the last few months where a loss relief claim was blocked. Clubs need to realise the importance of having a business plan in these situations: evidence of intent can be of vital importance.
Scroll on down for more news, toolkits, briefings, and updates on Finance Act 2013.
Best wishes
Nichola
Nichola Ross Martin FCA
Tax Director
www.rossmartin.co.uk
Your online Virtual Tax Partner: practical support for accountants, tax advisers and their clients
Quick news
No loss relief for local football club
Loss claimed blocked where there is no reasonable expectation of a profit
Autumn Statement
The Chancellor will deliver his Autumn Statement on 4 December 2013. This is when we will find out what measures are being proposed for inclusion in the 2014 Finance Bill. We can have a guess at this stage...More
Workplace Pensions: crisis warning
Financial advisers are warning that they may not have the capacity to set up workplace pensions ahead of auto enrolment for workplace pensions. Tactical tips: contact your pension provider as soon as you receive notification of your staging date, or plan ahead and check your staging date now...More
Capital reduction: index
Capital reduction is the process by which share capital or other capital reserves, including the share premium account of a company are repaid to shareholders. We now have a full range of guides on this topic for shareholders and directors.
Our Subscriber Toolbox
NEW: directors' service contracts - top tips
- Company law requires that a director has a service contract with his company however many small companies may not be aware of this.
- Whether the contract is verbal or in writing, the company must keep a written note of its terms to be available for inspection by shareholders. Shareholder approval is required if a contact is for a term exceeding two years. The Companies Act 2006 considers that there is an "employment" created by a director's service contract, but this is not necessarily the case for employment law.
- A director's service contract may double up as an employment contract if you want it to, however some very careful thought is needed is deciding whether a director should be an employee in terms of, employment rights such as unfair dismissal and redundancy, the National Minimmum Wage, or even workplace pensions.
- IR35 can also cloud the whole issue of director's remuneration and employment rights. IR35 is a tax measures so no employment rights are created when a deemed salary payment is made.
- The potential pitfalls in not addressing this issues concerning directors and their contracts don't just end there, add in a dispute with HMRC, the company or the shareholders or the company gets into financial difficulty there may be substantial regret and a high cost as a result of failing to have an appropriate agreement in place...Read More
Property & letting: CGT and IHT issues
Three contrasting cases involving business asset CGT relief and residential properties make interesting reading.
Tax planning for income at marginal tax rates
UPDATE: strategies for avoiding higher rates of tax, in general, for the self employed and for employees and directors.
Directors: tax planning toolkit 2013/14
Our a rolling ESSENTIAL tax planner, so we continue to update this all year as tax law evolves. The 2013 Finance Act made some significant changes to the tax rules affecting directors, our toolkit provides you and your adviser with a heads up on "what's hot and what's not" in 2013/14.
Directors' loan accounts: toolkit (freeview)
A checklist that details the main tax issues surrounding directors' loans.
Close company loans toolkit
Essential reading with a focus on new rules for "bed and breakfasting" loans to participators and measures affecting loans to LLPs. Review of latest consultation for reforming the loans to participator rules.
Shares and employees
Employee Shareholder Status - tax & planning
UPDATE: a new type of employee and a new type of employee share scheme.
Employment Related Securities
This explains what happens when you give an employee or director shares outside of an approved share scheme or EMI option scheme.
ABC or alphabet shares: directors & employees
This links you to guides for directors, family companies and employers.
Close Company guides and updates for advisers
Will I pay less tax if I trade via an LLP?
An overview and comparison of key points
Running an LLP in tandem with a company
Tax planning suggestions for alternative structures
Do I pay a salary or dividend?
The tax-planning points and pitfalls of using dividends to create a tax-efficient pay package.
Still coming to terms with the new Finance Act and other recent changes?
Limit (cap) on income tax reliefs
UPDATE: yet more examples of situations which are affected by this cap (from our Virtual Tax Partner helpline), surely this measure needs to be amended?
Disincorporation Relief
The new relief applies from 1 April 2013. It may be useful for small companies which decide that it is administratively easier to scale down and become sole trades or partnerships.
IR35: changes from 2013
From April 2013 under measures introduced in the 2013 Finance Act office holders will become within the scope of IR35.
When an inspector calls
Health & Wellbeing professionals NEW disclosure opportunity. Notify HMRC by 31 December 2013.
Let Property Campaign Aimed at property landlords who have failed to disclose rental income. Unlike other fixed term opportunities this one has apparently no deadlines for registration: it will be open for at least 18 months.
Disclosure Opportunities: Top Tips NEW: advisers make sure that you understand how the different rules all interact.
IHT
IHT: non-domiciled spouses
From 6 April 2013 a non-dom spouse may elect to be treated as UK domiciled, this might be a dangerous election to make without some careful consideration.
IHT: restrictions on liabilities against the estate
Provisions were introduced by the Finance Act 2013 that restrict to what extent certain liabilities may be deducted against an estate on death. HMRC has now updated its manuals to reflect the changes which may catch out advisers and taxpayers alike.
'Simpler' Accounting for tax
Accounting: Simpler Income tax (cash basis) / fixed expenses Start here (self-employed taxpayers) to decide which of (or both) the new measures to adopt.
Board and lodging adjustments All change from 5 April 2013.
Cash or accruals accounting toolkit At a glance summaries with planning points and examples for all advisers in this new guide.
Flat rate expenses or actual cost toolkit Essential briefing for advisers and clients.
Land and Property
Furnished Holiday Letting
UPDATE: our detailed guide contains a summary of all the recent changes which is useful for talking over with clients.
Wear and tear allowance and the renewals basis
The rules changed on 6 April 2011 and then again on 6 April 2013: this updated guide explains the different tax treatments year by year.
Annual Tax on Enveloped Dwellings (ATED)
The first self-assessment return for ARPT will be due in 2013/14 and made by 1 October 2013.
Joint property: legal v beneficial ownership This guide provides you with a concise summary of the differences between legal title and beneficial ownership and explains what elections or actions are necessary to ensure that tax treatment matches your intentions.
Free-view guides
Travel and tax UPDATE: this is our sign-post to our guides in this area. If you are ever short of something to say to a client start here - the new rules for simplification of accounts make this whole topic quite fun.
Tax-free benefits and perks UPDATE: can you spot the changes? (scroll to the bottom to find the answers).
Staff parties and annual functions UPDATE for 2013.
Directors' loan accounts: toolkit An essential guide for directors and companies on the income tax and NICs treatment of overdrawn loan accounts.
Editor's choice
Schedule 36 information notices
Mini guide to HMRC's power's with topical tips and case law
Purchase (repurchase) of own shares Step by step guide to ensure Companies Act and tax compliance is met to allow a repayment to be treated as capital in the hands of the outgoing shareholder.
Top Tips for directors
Converting part of a home into an office
How to create a tax-efficient home office.
Can I charge my company rent for use of my home?
- Recharging the company, on the same basis as a conventional home working employee for a proportion of your bills and running costs. This is explained in Working from home (directors) or
- Formalising a licence agreement with your company in order to allow it to occupy part of your property. It then pays you rent and service charges and you then claim all your expenses under self-assessment...More
Working from home (directors)
UPDATE: the same rules apply to home working directors as other employees. However, a director is more likely to be able to charge rent and there may be some additional issues and complications by virtue of their office.
Tax masterclass: running an LLP & Co structure
A guide is for trading companies and professional practices: we see many different structures and so we are constantly updating this guidance.
Annual Investment Allowance
Update: a handy summary with planning points.
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