An easy guide to Limited Company shares and your rights
If you rent out a residential property, HMRC will want to know the total amount received and the expenses you’ve paid for. It applies even if there were periods when the property was empty.
So what to do if you’ve missed the submission date for a tax year? Or even a few tax years?
There is a process that you can sign up to called The Let Property Campaign to cover situations like this. After signing up for this process, HMRC give you 90 days to send them the figures for the missing years and your tax liability will be calculated.
This means that penalties will be reduced because you made the initial step to admit you are late to HMRC. Also, if you cannot afford to pay the tax in a lump sum, HMRC will agree an initial payment with you and then monthly payments going forward.
The DDS form can be found on HMRC’s website; filling this in online will inform HMRC of your decision to sign up for the Let Property Campaign, and HMRC will send you a Disclosure Reference Number to use for the process of disclosing the information.
What happens when you take a lump sum from your pension and the tax relief that’s available.
There are a few things to consider when deciding how to split shares between a couple.
Who genuinely owns the business, founded it and acquired it? Who works in it and earns the money? If the person who formed, and runs, the company isn’t the majority shareholder, this could be storing up trouble – particularly because, in the event of a fall-out between a couple, the main worker could find themselves not in control of their own Company.
Splitting shares between spouses can be advantageous – particularly when their respective taxable income is unequal. It is common for a shareholder to transfer shares to their spouse if it minimises their overall tax bill. Transferring shares to a spouse is straightforward and there are no Capital Gains Tax implications.
Relationship to work done by each spouse
In 2007, there was a court case concerning a law called s.660a, in which the House of Lords ruled that a shareholder can give shares to their spouse without there being any tax issue - so long as the share transfer was an outright gift. No legislation has since altered this position.
However, I do sometimes hear concerns from people who believe it might be unsafe to gift more than about 30% of the share capital to a non-working spouse. This is not the case.
This term describes the situation where there are different share classes with different rights – e.g. perhaps A shares with voting rights and B shares etc. with no voting rights but a right to dividends. The idea is that dividends are paid out in a tax efficient way to the B/C/D shareholders without the main director/shareholder having to give up control – so, it could be said, there is no real “outright gift”. It is this sort of set-up where Companies are potentially at risk of an HMRC enquiry – and I advise being very cautious around setting up Alphabet share structures.
This article gives details on how to claim the Marriage Allowance, which is quite straightforward, as long as you qualify.
Many couples are unable to benefit from the Marriage Allowance; AND the maximum benefit is only £238 (2018/19). But it’s simple to calculate and to claim.
It is for Married Couples and Civil Partnerships where one is a Basic Rate Taxpayer (taxable income £11,850 - £46,350) and the total income for the spouse is below £11,850 (the Personal Allowance).
In this situation, the person with the lower income can transfer up to £1,185 of their unused Personal Allowance to their spouse which – potentially – will save the higher earning spouse up to £238 in income tax (20% x £1,185).
Claim online at HMRC and backdate the claim to the start of the current tax year. HMRC will then either issue a higher tax code to the person receiving the Marriage Allowance, or, if that person is self-employed, the Marriage Allowance will be given via their Self-Assessment tax calculation.
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.
Yes - but it's complicated - and how much depends when you bought it!! For cars bought after 31st March 2018, with CO2 emissions over 110g/km, the tax relief (called a Capital Allowance) is 8% of the cost/tax value of the car per year; for cars with CO2 emissions of 110g/km or less, it’s 18%; but, for new cars with emissions of 50g/km or less, you can claim tax relief of 100% in the year of purchase. The figure is then reduced by the percentage of private use.
Example - for a car purchased for £5,000 in 2018/19, with CO2 emissions of 105g/km, and used 75% for business. The Capital Allowance that can be claimed is £5,000 x 18% x 75% = £675. Next year, the tax value of the car for calculation purposes would be reduced to £4,100 and a new calculation would need to be made.
You should get tax advice because you might benefit by not claiming Capital Allowance until a later tax year.
The most important things are:
- You must pay at least the National Minimum wage.
- Get Employers’ Liability insurance as soon as you become an employer.
- Send a written job description (including Terms & Conditions) to your employee.
- When employing someone for over 1 month, give them a written statement of employment.
- Register as an employer with HMRC (do this 4 weeks before paying your employee, and get some Payroll software that can deal with Real Time Information submissions).
- Prepare to auto enrol eligible employees into a company pension scheme.
- If your business works with vulnerable people or security, apply for a DBS check (formerly CRB)
Don’t leave everything till the last minute!
*Further information is available from Gov.UK or on Twitter @HMRCbusiness
HMRC will either send you a Tax Return to complete or, you may know that you have income tax or capital gains tax to pay.
However, HMRC have a list of further circumstances where a Tax Return should be prepared, including:
- Your income from self-employment exceeded £1,000
- You are a company director
- You received over £2,500 in rental income. If it was between £1,000 and £2,500 you should contact HMRC
- You received more than £2,500 in other income such as tips or commission
- You received £10,000 or more before tax from savings/investments
- You made Capital Gains in excess of £11,300
- You have received dividends in excess of £10,000
- Your taxable income exceeds £50,000 and you, or your partner, receive Child Benefit
- Your taxable income exceeds £100,000.
Let AMS advise you and prepare your Tax Return - £120+VAT Contact AMS