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Never leave a Tip with the Taxman
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What Are You Going To See
● Who Am I?● The Common Tax Mistakes● Inheritance Tax Reliefs● Xero● Final Thoughts
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Who am I?
● Chartered Accountant● Amateur Photographer
“The only difference between a Taxman and a taxidermist is that the taxidermist leaves the skin.” Mark Twain
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Common Tax Mistakes Made in
Business
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Common Tax Mistakes Made in
Business
My typical client: self-employed with taxable income of £30,000
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Income Tax
• Total tax due £6,532 - Made up of:
• £3,880 Income Tax• £2,652 National Insurance
“Income tax returns are the most imaginative fiction being written today.” Herman Wouk
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Corporation Tax
By incorporating:
He saves - £1,588
• Corporation Tax - £4,944
“Income tax returns are the most imaginative fiction being written today.” Herman Wouk
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And the Rest
• Using the family to save tax:1. Employ his wife £2,0002. Employ the children ?• Use of home as office
£400• Use fixed rate for mileage
£300• Split the share capital £2,500“Government's view of the economy could be summed up in a few
short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” Ronald Reagan
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VAT
Not currently VAT registered• Current level of inputs - £2,350• Set up a VAT registration - tax saved
£2,350• Bonus - looks like he has a turnover
of £80k• Double bonus - FRS - tax saved now
£3,250Where is the politician who has not promised to fight to the death for lower taxes- and who has not proceeded to vote for the very spending projects that make tax cuts impossible? Barry Goldwater
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Capital Gains Tax
• Couple own a rental property• Previous accountants never asked
about CGT• Tax rules were about to change• Property only in husband’s name• Tax due is selling after 5 April -
£10,250• Property sold prior to 5 April• Tax saved £10,250
“Be wary of strong drink. It can make you shoot at tax collectors... and miss.”
Robert A. Heinlein
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Total Savings
• Incorporation £1,588• Wife’s wages £2,000• Split shares (potential)
£2,500• Use of home as office £ 400• FPCS £ 300• FRS £3,250• CGT
£10,250• Total Savings £20,288
A democratic government is the only one in which those who vote for a tax can escape the obligation to pay it. Alexis de Tocqueville
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The Use of Allowances
Inheritance Tax
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Inheritance Tax
• Who likes to take about death?• We do anything to avoid it.• What's the potential consequences of our
squeamishness? • But 1st - How much is raised from IHT?
“Thinking about death is like looking at the sun. We all do it occasionally, but it is only bearable for the briefest of moments” – Theodore Dalrymple
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Example
• Widow – main asset £375,000 home in Lichfield
• Cash in bank - £125,000• PETs - £50,000• Husband died in 1995, gifting ⅔ of his NRB
to children.• Good tax planning at the time, but disaster
now. Only ⅓ of current NRB was available to widow (i.e. £110,000).
• Tip – now use spousal exemption & make it clear in will
• NRB available £435k, leaving £115k chargeable (£46K)
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Distaster Strikes
• Widow diagnosed with cancer Feb 2011. Dies Dec 2012.
• No time to plan away the IHT. No one discussed it!
• What could have been done?• Annual Allowance - £3,000/year. Had it
been given every year from 1995, £51,000 would have been taken out of the estate. Can be out of capital
• Small gifts exemption – 3 children; 3 in-laws, 8 grandchildren - £3,500/year. £56,000 out of the estate - £22,400 saved. Can be out of capital
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What is overlooked?
Gifts Out of Income• Must be out of surplus income• Based on a pattern of spending over 3 years• Make a record of gifts made.• Make you intentions known in advance in
writing.• Give the written document to your
executors• Examples – pay for school fees, take out a
savings plan, or insurance bond.The tax collector must love poor people, he's creating so many of them. Bill Vaughan
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Conclusion
• The tax was entirely avoidable using these basic reliefs.
• But it wasn’t because the family avoided the subject.
• How do we get talking about it?• Visit www.death-clock.org• My death is scheduled for Saturday 5th June
2049• That gives me 34 years to planThe hardest thing to understand in the world is the tax
code. Albert Einstein
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Accounting Made Easy
Xero
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Accounting:- what are the options?
● Bag of invoices● Spreadsheets
● Software
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So what makes Xero Different?
● Different options● Bank feeds
● Adds-ons
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Receipt Bank - £10/month
● Solves the paper bag problem● Lets you focus on your business● Upload by email; mobile; dropbox
or post● Receipt bank analyses your
receipts and uploads it to Xero.● All you have to do is refresh the
bank feed.
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Tripcatcher - £1.50/month
● Records your business mileage● Can be entered by mobile or online● Mileage and VAT calculated by app● VAT automatically updated by app● Claim automatically uploaded to
Xero● Saves time and maximises tax
deduction
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Chaser - £20/month
● Useful if you have poor payers● Chaser takes all invoices from Xero● Sends a reminder every 7 days● You control who receives the
emails● Emails get progressively terse● You can edit the text of the emails● Client get a thank you when they
pay.
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Xero Summary
● Xero allows a closer relationship between you and your accountant.
● The add-ons give you more time to concentrate on what you’re good at.
● The whole package gives me more time to concentrate on what’s important to you - saving tax & giving business advice.
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Final Thoughts
Chat To Me In The Break
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How to get in touch
● Call me – 01889 586 431● E-mail me – [email protected]● Web – www.pjwaccounting.uk● LinkedIn - Paul Woodcock● Twitter - @PJWAccounting● Facebook -
www.facebook.com/pjwaccountingltd● Google+ -
www.plus.google.com/+PjwaccountingUk● Tumblr – www.pjwaccounting.tumblr.com/