Tax Services: a Brief Introduction

The man who said that nothing is certain except death and taxes was only half right.  One of the most satisfying aspects of my work is helping people to mitigate the worst effects of our ever more complicated and confusing tax system.  By thinking ahead and planning for the future it is often possible to prevent HMRC (or foreign governments) putting a big shovel into your hard-earned income and wealth.  You do not have to be Starbucks or Google (though they probably have more scope). Take something as simple as income tax.  If you are employed you are ‘taken care of’ by the PAYE system.  That may be inevitable, but if the circumstances are right you may be able to be categorised as self-employed and have control over the timing of your income receipts and a wider range of expenses allowable against tax.  HMRC dislike this, and there are proposals around to make it more difficult, so you need to understand the risks.  Pension planning can help either the employed or self-employed. But for most people the tax planning opportunities are to be found in the capital taxes, capital gains tax (CGT) and inheritance tax (IHT).  For CGT, the most valuable asset is likely to be your home, and usually you will be able to get exemption when it is sold.  Complications arise when you have a second home, and you can then choose which is to benefit from the exemption – you cannot have it on both at the same time, even if you are married and your spouse owns the other one.  (If you are not married but co-habiting you may get two exemptions, but I do not suggest that is a good reason for staying unmarried!)  The exemption is quite complex for something which is widely available, and when buying a selling a home you will need to take care. IHT used not to be a problem for most people but, with the exempt ‘nil rate band’ limited to £325,000 until 2018, more and more people are getting caught, especially as house prices rise, particularly in London and the south.  Forward planning may help, for example using equity release schemes to reduce the equity in the property – particularly if you can do this within the family and prevent wealth leaking out to financial services companies.  Passing on property during your lifetime can be very helpful, but for maximum effect you have to survive the gift by seven years.  It may be better to structure investments into assets attracting 100% business property relief, but this is a specialist area and advice is needed. If you are in business (including farming), then you have significant planning opportunities.  You will also need to consider tax when buying or selling a business; and the drudgery (and complications) of VAT are always with us.  VAT gets very tricky when commercial property or development activities are involved, and forethought can save large sums.  Finally, you may want to pass on the business on within the family without tax crippling the enterprise.  It all needs forward planning. If you have foreign citizenship, residence or interests, that adds a whole new layer of opportunity – and complication.  There is no one panacea and each case should be looked at on its merits.  There is no room to say more here. A final point: tax is constantly on the move, and what may have worked last year may well have changed radically this.  There are, I am afraid, no short cuts in tax planning. Richard Sowler is a tax law specialist for Setfords Solicitors. Click here to contact Richard.