2022 - Top 8 Tax Queries
Having a look back at the most common tax areas applicable to our SMEs in 2022. Which of these applied to you and did you get an acceptable result?
1. Extraction of profits from your limited company 💪
We had fun with changing national insurance thresholds and rates but got there in the end! Optimum director salaries might be £12,570 or £11,908 with dividends. Other ways to take money from your company include home office rent, pension contributions and interest on loans made to your company. Dividends were difficult for some where sufficient after-tax profits weren't achieved and these should be repaid to avoid other tax issues.
2. Using tax losses to generate a cash refund 👍
Limited companies, sole trader and partnerships enjoy different rules with some surprisingly helpful results. By definition, when you have tax losses you're likely to need a cash injection and the tax system can help you. We've made many claims, but also found HMRC needed to be chased more than usual to part with your cash! We're known for never giving up 🙂
3. Research and development cash refunds 💰
Along similar lines, if your company also carried out R&D, we made many claims to get you a cash payment from HMRC to encourage you to do more for the good of the economy. We're not sure the new restrictions will help you much more from April, however!
4. Capital allowances - 130% super-deduction and electric vehicles 🚘
We've made many 130% capital allowances claims for limited companies for new equipment and 100% tax relief for new electric cars. If cash has been tight, hire purchase was used to further help with cashflow.
5. Capital gains tax - residential property 🏠
Taxpayers selling a rented or second home needed advice and real time tax returns prepared. With many also benefitting from principal private residence relief, or for overseas residents, pre and post April 2015 gains, the calculations got a bit interesting! We've used the rules to the optimum to help keep these bills down.
6. VAT - Overseas business to business services 👥
It's very easy to get this area wrong. When you provide services to another business and invoice that overseas company, it's 'outside the scope' for VAT. This is a sweet spot where no VAT is charged by your business and your business is still able to reclaim VAT on all costs as normal. This means you may want to voluntarily register for VAT to recover this VAT if it's worth the administration of preparing VAT returns.
7. Rewarding staff 🎉
We've advised on ensuring all taxes are considered: corporation tax, VAT, income tax and national insurance. Annual parties up to £150 for each person and gifts up to £50 cost each are the most tax efficient as long as they're not in recognition of doing a particular piece of work or meeting a target. Pub or restaurant visits are more problematic. EMI share options are more tax efficient but don't always suit the company culture.
8. Off-payroll working and IR35 🙄
Again, we had a brief time thinking off-payroll working was behind us, but it ended up staying. We're seeing more customers of our clients happy to confirm they understand a piece of work is outside these rules and therefore more consultants coming back setting up limited companies. It's essential to get your Status Determiniation Statement or SDS, otherwise you're at risk of a very high tax bill.
Here's to 2023 and making the most of the system we're presented with! Happy New Year! 🥂