Tax Guru
Moray-Life

This feature is sponsored by: TaxAssist Elgin

Writing exclusively for Moray Life, Elgin-based tax and accountancy specialist Andrew Richardson gives advice on financial matters to small businesses.

If you have a tax query then please submit your questions directly to Moray-Life using this form and Andrew will try to give you a response on this page next month.

 
 

Tax Guru 09-2013

Hello again!

My name is Andrew Richardson and I have been running TaxAssist Accountants in Elgin for six years. I am hoping that this tax advice section will become an interactive feature. Submit your tax and accountancy questions to Moray Life and I’ll answer a sample of them each month, along with a brief summary of the tax issues we should be looking out for.

Q: I have a question about workplace pensions. I am the sold director and shareholder of my own small business, will auto-enrolment apply to me? I only take a small salary that matches the personal allowance.

A: Automatic enrolment (auto-enrolment) is new pensions legislation which requires an employer to provide and contribute to a pension scheme for their staff.

Only 'Eligible workers' need to be enrolled automatically. Generally-speaking, these are workers aged over 22 and earning over £9,440 per annum.

In order for your company to not be deemed as eligible, you must be the only director of the company and the company must have no other employees.

There are perks of having a pension scheme. Not only are you saving for your future, but the pension contributions made by the company on your behalf are likely to be a tax deductible expense for the company and should not trigger a tax charge on you either.

Q: I sold a flat a few years ago that was my home before I got married. I never told HMRC about this…should I have done?

A: When you sell a residential property in the UK or abroad, there may be Capital Gains Tax to pay.

However, the impression I have is that this flat used to be your only home. You don't usually have to pay Capital Gains Tax when you sell your own home.

But the flat stopped being your home when you moved into your marital address. Therefore, some of the profits from the flat may be subject to Capital Gains Tax.

HMRC will use their resources to identify those who fall foul of Capital Gains Tax and haven't come forward. The penalties they face will be more severe and HMRC may even pursue a criminal investigation in extreme cases. So the advice would always be to come forward first; don't wait for HMRC to find you.

Q: What is a limited liability partnership?

A: A Limited Liability Partnership (LLP) is a legal business entity and in general law, is regarded as a corporate body - just like any other company. It must submit its accounts and an annual return to Companies House and ideally, there should be a LLP agreement in place.

However, for tax purposes, it is treated much like a partnership and each member is therefore assessed on their share of the profits. Each member must submit their own tax return and they are subject to income tax and Class 2 and Class 4 National Insurance. The LLP itself does not pay tax but it does have to submit a tax return - exactly like an ordinary partnership.

The main advantages of a LLP are that its members have limited liability (like a company) but the flexibility of a partnership when it comes to their profit sharing arrangements. In the past, a LLP could also be more tax efficient; however, since Corporation Tax rates have reduced, such an advantage has faded.

 

If you have a tax query then please submit your questions to Moray Life and I'll try to give a response next month.  And always remember...

'The wisdom of man never yet contrived a system of taxation that would operate with perfect equality'.

By Andrew Richardson

TaxAssist Accountants Moray

Andrew’s contact details:

Please see my TaxAssist page for more details.