Posts tagged ‘Tax Rate’

If you were among those hit by the new 50p top tax rate back in April, then you could now be more likely to receive a rather unwelcome knock on the door from the taxman.


Under plans unveiled by the Liberal Democrats at their recent conference in Liverpool, half of the UK’s 300,000 higher earners affected by the top tax rate face having their tax affairs checked over by HM Revenue and Customs (HMRC).

This means that the number of tax investigations will rise from the current figure of 5,000 to 150,000 a year – an increase of 3,000%.


The £900 million drive is designed to crack down on tax avoidance, the legal practice of using existing provisions within the current tax regime to minimise your tax liabilities. This should not be confused with tax evasion, where tax liabilities are avoided by illegal means, amounting to tax fraud.

Those who ‘hide’ money in offshore accounts will also come under scrutiny as part of the increased investigations.

As a result of the scheme, the number of criminal prosecutions relating to tax matters is expected to increase five-fold, while the Treasury has announced that it expects the initiative to bring in £7 billion a year by 2015.

While tax avoidance is certainly not illegal, the announcement highlights the importance of seeking professional advice on all tax matters to ensure you do not fall foul of any investigation.

Impact on small business

Even if you have nothing to hide, tax investigations can be both costly and time-consuming, particularly for smaller businesses which have neither the time nor the money to spare.

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Friendly, approachable, reliable professionals

At George Hay, we can advise clients on all aspects of taxation and can help you ensure that all your tax affairs are in order. We can help you ensure you do not pay too much or too little tax and, should you find yourself the subject of an investigation, can offer as much assistance as you need.

We are also able to offer tax investigation protection. As with any insurance, everyone hopes they will never need to use it, but taking out cover now could save you thousands of pounds in investigation fees should the taxman come calling – money that could be put to better use in your business.

For more information on any area of taxation, including tax investigations, or to find out more about tax investigation protection, please contact us.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

Along with the England flags and hopes of World Cup success the emergency budget is becoming a distant memory, but if you are in business you shouldn’t be so hasty.

Here at George Hay, we regularly advise on the advantages of incorporation and strongly believe that for the majority of small businesses it is the most tax efficient structure, as remuneration (profit distribution) for the owners/directors can be carefully planned to benefit their personal tax circumstances.  These savings can be particularly advantageous if you are operating as a family business.

Corporation Tax reduction

One of the main headlines of the budget was the reduction in the Corporation Tax rate by 1% making the Small Companies rate 20% from April 2011. This was good news for business owners but of course it only applies to those which are incorporated. Those who operate their business as either a sole trader or partnership are subject to Income Tax and National Insurance on their business profits so will instead be hit by the rise in National Insurance rates from April 2011.

The changes in the Corporation Tax rate and National Insurance rate along with forecast reductions in the basic rate threshold for individuals poses the usual question of should those in business consider incorporating and is it beneficial for everyone to do so?

Indicators do strongly suggest that it is widely beneficial for most owner managed businesses to incorporate and when doing the sums at the new rates from April 2011 the tax savings as a result of incorporation increase even more.

Risky Strategy?

There have been many attempts to try to curb the incorporation trend in the past due to the significant tax savings that can be achieved.  Gordon Brown aired his view that business owners are not paying the ‘right amount of tax’,  and we are sure HMRC will continue their expensive and difficult case in the courts.   But I personally have been advising on incorporation for over 10 years and it continues to be a successful strategy, so why not take advantage whilst the regulations allow it?  It is not something that can not be withdrawn from if circumstances change.

Real life example

In 2007 I was recommended to a small business that was earning very handsome profits due the unique nature of its trading activity.  On engagement I quickly did some sums (good old Excel!) and explained the value of Incorporating.  The owner immediately understood and asked me to incoporate the business without delay.  By involving his wife in the business strategy, she was able to take a ‘very nice’ Company Car and between them they saved and continue to save over £15,000 per annum in Tax and National Insurance.  If only they had sought advice years before…..

It’s not all about tax

Careful consideration should be given to incorporation and expert advice sought. It is not always the right choice for everyone and other factors come into play such as legal liability, increased regulation and therefore costs, disclosure of financial information and future business plans such as sale of the business but it is always worth thinking about.

For further details on the key announcements in the ‘Emergency Budget’ download a copy of our budget summary.

Disclaimer: This article is for general guidance only.  All taxation planning should only be undertaken after appropriate professional advice.  George Hay Chartered Accountants are registered to carry on audit work and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.