bjn - Profile

What did people with business aspirations do before business link?

Mostly they chewed over their ideas with their business/other colleagues then called on professional advisers such as Chartered Accountants and went on to become successful.

Most professionals will give their time freely to advise and assist in the initial stages; this is one of the traditions associated with putting something back into the community and if the business is successful work will probably flow from the initial freely given input.

Bankers, Business Angels and others cultivate relationships with professionals to find opportunities to meet with entrepreneurs and signposting to more specialised disciplines is all part of the service.

No, all roads do not necessarily lead to Business Link. Other routes have always been available and still are.

Steve

As far as I am aware the only advantage that an LLP would have over a Limited Company in the situation of two Limited Companies venturing together relates to the easier departure of one of the companies or the introduction of a new partner (in the sense of disposal/issue of shares and tax consequences). An LLP should be seriously considered if the relationship is unlikely to be long lasting.

If the venture is in the nature of a limited time project or projects then a Joint Venture, which is not necessarily a separate legal entity for tax and VAT is likely to be an easier approach although getting the agreement and rights, duties and obligations of the parties sorted may appear to be long winded but the process usually represents good commercial planning.

You mention Joint Venture, Ltd Company and LLP. All three are potential structures to consider.

Joint Venture - normally, in my accounting world, implies two entities wanting to join forces to do something but not willing to form formal relationships and everything that goes with it with each other as is the case for ltd company and LLP.

Ltd Company - Tried and tested. Works

LLP - Introduced around the time that the big firms were in the press daily with legal actions concerning audit abundant and one of the key issues for professional firms tempted to go this route was limitation of liability. There are no particular advantages of using an LLP that I am aware of apart from limitation of liability but Ltd companies provide this anyway apart from in the case of negligence!

Don't knock it; an apology from any Government Dept. is rare!

The PAYE system is and always has been no more than an estimate of an individuals tax liability for a tax year. In general over and under payments frequently occur and usually HMRC carry out a reconciliation at the tax year end. What has happened is that HMRC did not carry out a reconciliation last year i.e. for the year to 5th April 2009 and that reconciliation has been combined with the 2009/10 reconciliation raising the normal level and scale of the adjustments perceived to be required to correct the estimated PAYE collected.

People receiving letters from HMRC bring news of either refund or underpayment should be cautious. The "reconciliation" referred to is simply checking the calculations and collections on a "known facts" basis. If HMRC do not know the full story or details of people's changed circumstances then the calculation will still be wrong.

Those facing an underpayment calculation where HMRC have failed to act on previous notifications of changed circumstances that would eliminate the underpayment when taken into account can and should challenge the HMRC calculations, report the matter to the appropriate HMRC Officer and demand an apology.

Do we need to be cautious about repayments? Yes; accepting repayments without entitlement can turn out to be a nightmare!

It is also very unusual to see an announcement of this type. Perhaps it was a politically motivated announcement that went wrong?

Hi - The answer to this CGT question is that there is no set period. Some tax commentators would recommend at least twelve months spanning the tax year end. The Revenue will look at the quality of occupation of the property and intentions.

I can recall a case reported some time ago where the taxpayer won the argument. This was a large period property set in a small town with bags of history surrounding its buildings and location. The buyer spent a small fortune on the property and sold it on without taking up occupation at all. The Revenue challenge was no doubt influenced by the fact that the buyer was a property developer and the gain was significant.

The taxpayer was able to establish that he and his wife had purchased and improved the property with the full intention of occupying it as their main residence. The reason that they did not move in was that his wife refused to do so because of the resident ghost!

Hi Mark

This change has been around for a while and there's more in the pipeline!

With loss of personal allowances for income over

Hi Mike

Yes you will receive a 2010 SA Return shortly after 5th April.

As already said most of your entries will be straight forward. Although your self employment may be minimal this is probably the most complex aspect. It may be that with a bit of thought a tax loss may be created that can be used against your previous 40% tax and since it may be a while before your new business produces results taxable at higher rates again it is probably worth keeping your powder dry for a while to see how things go to maximise the loss set off.

Choosing your accounting date, particularly the first one, which in your case could be up to 5th April or any length up to 18 months from commencement could have a significant bearing on your 2009/10 tax position and for future years. Your ultimate deadline for submitting your 2010 return is January 2011. If you do not have a basis period fixed and figures ready to put on a return at the time it is due or at the time you want to submit it you can put in a provisional return (this is what I meant by "guess"). If you do this you need to say in the additional information box that you will file a final return when you have the figures and it is usually good practice to indicate a time line for this although I have never known the Revenue to take anyone up on it if the time line is not met. Bear in mind taxable profits for a longer period allocated on a pro-rata basis back to 2009/10 will increase taxable income for that year but you will have 4 months worth of PAs to use up. Tax losses carried back will be relieved at 40%.

The main reason for delaying the final outcome for the 2009/10 year is that no one has a crystal ball and the delay will provide a choice of cutting off at 5th April or having your 2009/10 results assessed for tax on a pro-rata basis over a longer period and you can use the result that has the best tax repayment outcome for you. The cost of delay is no more than the timing of your rebate. The main reason for not delaying is to take cash in the form of a tax rebate earlier.

Things that you may need to consider will include the level of confidence that you may have in profit growth over the next few years. Being able to choose an accounting date of 30th April or 31st May will give you considerable cash flow advantages in terms of when tax will fall due for payment if you are confident of a growth pattern especially if it takes you back to higher rates. This benefit may outweigh the benefit of getting the tax rebate available to you now.

Whichever you choose do not forget:

1. The date of commencement of trading is not necessarily the date that you registered with the Revenue nor when you started looking for work. I would think that in your case the date will be on the first occasion you completed a paid assignment.
2. Pre-trading expenses - Any expenses that you may have incurred in the period prior to date of commencement of trading (up to 6 years) that are of the type that would be allowed against trading income in the normal course will be treated as incurred on the first day of trading. Capital items such as IT equipment etc. are also treated as incurred on the first day of trading but are excluded from qualification for first year capital allowances but may qualify for Annual Investment Allowance.
3. You may have brought items into use by your business that you had owned previously and bought out of net of tax income e.g. home office furniture, IT Kit etc. You should treat these as capital items on the first day of trade valued at a reasonable depreciated cost and this will include motor cars.
4. Your income figures need to be stated on an earnings basis. This means if you have any completed assignments where you have not been paid by your accounting date you will need to bring them in. For any assignments not completed or paid for you can value these at cost and exclude your own time.

Sorry to make a lengthy reply, I hope this helps but I cannot illustrate the position better without having some facts and figures to work with. If you would like to contact me privately or vice-versa then I will be happy to help.

Regards

Barry

Hi Mike

Sounds to me that you probably have about 4 months worth of personal allowances unused from you employment. After 5th April is the time to deal with these and how long after depends on how you deal with your self employment or if you want to make the claim to set full allowances against your period of employment in 2009/10, possibly giving you higher rate relief.

If you have not already done so you will need to notify HMRC of your self employment. This needs to be done by 5th October 2010. When you do so they will issue a self assessment tax return for you to fill in to cover the year to 5th April 2010. If you notify earlier you can get the return done and submitted and this will sort out your 2009/10 issue but you still need to decide how to deal with your self employment - a. guess until your 1st 12 months is up or b. work it out and return it from commencement to 5th April.

If you need more detailed help email me.

Barry

Yes, this will be another burden for smaller business and organisations like charities who have both suffered in recent times. Is 2012 set in stone? I would imagine it was conceived pre-recession.

bjn