Tax Guru

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 04-2013

Hello again!

My name is Andrew Richardson and I have been running TaxAssist Accountants in Elgin for five 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.

The biggest issue facing employers at the moment is the introduction of Real Time Information (RTI). Below are some of the answers to your questions:

Q: My company is experiencing some cashflow problems and a friend suggested I should consider a CVA. What is a CVA?

A: When a company is in financial trouble there is an option that many directors turn to: liquidation. However, depending on the circumstances there are a few business rescue alternatives that may suit the situation better.

A CVA (creditors' voluntary arrangement) option provides a realistic alternative to liquidation for an insolvent company. This process gives directors an option of trading out of a difficult period to help with future profitability.

There are 8 key facts that all directors should know about the CVA option:

  • There is no mandatory repayment time frame or repayment amount
  • Following successful completion of the CVA the balance of debt not repaid through the CVA is written off
  • The company remains under the control of the directors
  • HM Revenue & Customs has a very high success rate for CVA acceptances
  • A company needs only 75% of creditors' to agree for a CVA to be approved
  • The company is allowed to continue trading throughout a CVA
  • To get the creditors' approval you must show them how a CVA is more beneficial to them then the alternatives
  • There is less focus on directors during a CVA and no investigations are made or submitted to the Insolvency Service

These facts highlight the key features of a CVA in which a director should be aware of when considering all the options available to insolvent and struggling companies.

Q: My husband and I own a commercial property personally, but our company operates from it. Is there any tax advantage in the company paying us rent?

A: Your suggestion has good and bad points to consider. On the plus side, the rent payments are tax deductible for the company, so it will serve to reduce the company's tax liability. The rent is taxable in the hands of your wife and you, but shouldn't attract National Insurance.

However, you are likely to forego some of your Entrepreneur's Relief on the sale of the property. Entrepreneur's Relief reduces the rate of Capital Gains Tax payable from 28% to just 10% on gains arising on the sale of business assets - provided certain criteria are met.

You must also consider whether there will be any VAT implications of charging a rent.

You would be advised to seek professional advice before charging the company rent, as the long-term implications on your capital gains tax position could be significant.

Q: I paid my company's corporation tax late because of cashflow problems. Will I be charged interest and penalties?

A: Interest will indeed be charged from the due date, to the date HM Revenue & Customs received their payment from you at their official 'Late payment interest rate'. However, there are no late payment penalties for corporation tax at the moment.

Please note, this only applies to the payment of your company's outstanding corporation tax. So if you also filed the company's corporation return late, then HMRC will charge you late filing penalties.

Q: I have been trying to keep abreast of all the changes being introduced as part of RTI. But I noticed the P46 for starters will go. How will employers now collect the relevant information from their new employees?

A: Under Real Time Information (RTI), employers will send HMRC information about employees' pay when- or before payments are made. This should mean more employees will pay the right amount of tax and National Insurance in the tax year.

Under RTI, when a new employee starts then forms P45 or P46 will no longer be sent to HM Revenue & Customs (HMRC). However, the details will still need to be collected, but they will automatically be reported to HMRC online in the weekly or monthly Full Payment Submissions (FPS) submitted via your payroll software.


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 only difference between a tax man and a taxidermist is that the taxidermist leaves the skin.'

By Andrew Richardson

TaxAssist Accountants Moray

Andrew’s contact details:

Please see my TaxAssist page for more details.