Conventional advice indicates that as a business owner you should take a low salary and remunerate yourself via dividends. For every £100,000 gross profit you will end up with around £59,000 in your pocket (assumes Lower rate CT and lower rate Dividend Tax). We have an alternative which will leave the entrepreneur with £87,000 whilst reducing corporation tax for the company.
Our strategy is a one-off commercial transaction, priced on an arm’s length basis and taxed in accordance with current legislative provisions, i.e. it is not “loophole” planning; nor is it trying to circumvent any tax avoidance legislation or HMRC “Spotlights”. As a consequence, there is no DOTAS requirement (though full white space disclosure is made), and there is no legacy arrangement open to subsequent attack by HMRC.
We have spent a considerable amount of time and research and are very comfortable introducing this to our clients. When considering alternative strategies it is important to review the pedigree of the strategy, the quality of the opinions and the track record of the provider. You should also assume that any strategy will come under scrutiny and it is important to understand what provision is put in place to defend it in the future.
For more information please email firstname.lastname@example.org
Tax planning to be wary of
- It sounds too good to be true.
- Artificial or contrived arrangements are involved.
- It seems very complex given what you want to do.
- There are guaranteed returns with apparently no risk.
- Upfront fees are payable or the arrangement is on a no win/no fee basis.
- The scheme is said to be vetted by a top lawyer or accountant but no details of their opinion are provided.
- The scheme is said to be approved by HMRC (it does not follow that this is true).
- Taxation of income is delayed or tax deductions accelerated.
- Tax benefits are disproportionate to the commercial activity.
- Offshore companies or trusts are involved for no sound commercial reason.
- The involvement of professional trustees is claimed to guarantee that the arrangements succeed.
- A tax haven or banking secrecy country is involved without any sound commercial reason.
- Tax exempt entities, such as pension funds, are involved inappropriately.
- It contains exit arrangements designed to sidestep tax consequences.
- It involves money going in a circle back to where it started.
- Low risk loans to be paid off by future earnings are involved.
- The scheme promoter lends the funding needed.
- There is a requirement to take out insurance against the failure of the tax planning to deliver the tax benefits.