I assume you intend to minimise tax by shifting dividend income from your tax return to your child - I’m asked this quite often because of the new dividend tax which came in April 2016.
If your child is under 18, then your dividends would still need to be shown on your tax return (a law called s.660b).
Also, any transfers of shares to a connected person – apart from a spouse – would mean that the shares must be valued at market value and Capital Gains Tax may be due – so a tax calculation will be needed.
Finally,if you do transfer shares to a child over 18, you must make sure any dividends go to the child and don’t end up back in your hands – otherwise HMRC may consider it to be tax manipulation.
If you have a genuine desire to pass on the business to your child – you should seek advice.
Most importantly, it depends on the deal. So get your calculator out! But do watch out for excessive mileage penalties in lease agreements.
Tax treatment varies depending on the method used to acquire a car – but it is often not tax efficient for a Company to own/lease a car because of high benefits-in-kind on company cars.
Car on HP (if the invoice is addressed to you/your company, it is an HP agreement or outright sale)
You can claim capital allowances on the purchase value of a car (dependent on the list price, CO2 emissions and type of fuel, possibly 18%, or 8% per year, even 100% for electric cars).
When selling the car, Sole Traders/Partnerships can claim can get full tax relief on the car’s loss in value; Companies can’t claim this so have to keep claiming the appropriate annual Writing Down Allowance (8% or 18%).
You cannot recover any VAT back on the cost of the car (excepting taxi and car hire Companies)
You get tax relief on the HP interest element of HP payments.
Leased cars (if the invoice is addressed to a third party such as a finance company, it is a lease agreement)
If leasing a car for (say) three years you either hand it back, or buy it, (usually large down-payments followed by monthly payments).
If you are VAT registered, you can claim back 50% of the VAT on the lease payments (100% for taxi and hire firms) – often a major advantage over HP agreements;
You get tax relief on the lease payments net of any VAT claimed back. But you need to spread the tax relief over the period of the lease rather than match it against the payments made in a period.
For cars with CO2 emissions over 130g/km, only 85% of the lease cost gets tax relief – net of the VAT reclaimed.
As a small business – they might be having similar problems! You should establish clear payment terms as soon as possible.
Meet or call your customer and tell the truth - this slow payment is damaging your business. Tell them you want to set up clear payment terms that they can manage. Agree an invoicing and payment schedule and get them to sign a contract or letter setting out what you have agreed.
Ensure that you invoice on time, ideally, as the goods are delivered and make sure your invoices state your payment terms.
Don’t employ debt collectors; keep your relationship with the business personal.
It might even be beneficial to offer a small discount for prompt payment, say within 7 days; the improvement in cash-flow could offset the cost.
Most Companies are ‘limited’ by shares, and ownership of the Company is represented by the number of shares held by shareholders. e.g. 20 of 100 shares = ownership of 20% of the Company. Typically, in shareholder meetings, one share = one vote. Shares also give the owner a share of the value of the Company when it is sold or wound up. Profits are paid out of the Company as dividends to shareholders when proposed by the Directors in proportion to shares held.
Directors proposing a dividend, should draft a ‘Minute’, and pay out the dividends to the shareholders; then they should issue a dividend voucher to each shareholder. For most small Companies, an accountant is consulted regarding the tax efficient split of shares between directors and their partners/spouses to ensure that minimum tax is paid.
Generally, the term fixed asset means a ‘tangible’ asset, which is used in the business, such as machinery, laptops, printers, vans etc. The expected life would be more than 1 year. Low value items which are used in the business, (usually under £100), typically, small tools, printer cartridges etc. are classed as expenses and are part of daily expenditure. Fixed assets are shown on the business balance sheet at purchase price minus ‘depreciation’ to reflect their current economic value.
- Mortgage interest is claimable (although, after April 2017 there are restrictions)
- Management charges/commission to letting agencies
- Property repairs – but not “improvements”
- Renewals of fixtures on a like-for-like basis (modern equivalents are acceptable)
- Maintenance costs and decorating – including gas safety certificates;
- Advertising for a tenant and obtaining/drafting a tenancy contract;
- Buildings/ contents insurance
- Council tax, water rates, service charges etc. if the landlord incurs these;
- Replacing furniture/white goods/furnishings on a like-for-like basis
- Travel costs to a rental property for inspections/repairs