Recession-Proofing
We consider below a number of points to help clients in the current climate in which there is an urgent need to save costs, maximise cash flow and keep liabilities to a minimum.
| Tax aspect | Potential cash flow benefit |
|---|---|
| CGT Annual exemption (£10,100 for 2009/10) | Use this year by year as there is no carry forward of unused exemptions |
| Income Tax Personal Allowance (£6,475 for 2009/10) | Use year by year as there is no carry forward |
| Use of exemption between husband & wife, and between civil partners | Transfer of assets at no gain / no loss to reduce liability |
| Employee benefits provided by employer |
Are these still of benefit to employee or could income tax liability be reduced, by opting for a company car with lower carbon dioxide emissions & lower benefit charge There’s benefit to the employer where business can claim 100% first-year allowance for a new car which has an emissions rating not exceeding 110g/km. Lower benefit charges generate lower liability to Class 1A national insurance contributions |
| Investing in tax-free Savings | Individual savings accounts (ISAs), National Savings Savings Certificates (NSCs) |
| Tax repayments due | Claim back quickly to have the cash in your account |
| File tax returns on time doing so with reasonable care | Do not incur interest charges and penalties through late filing of returns (from 2009/10 penalty is extended to all taxes apart from tax credits) |
| Rent-a-room relief in main residence | Can you generate cash from rental income? |
| Maximise capital allowances | To reduce business tax liabilities |
| Disposals | Sales are the commonest form of disposal but you can have a disposal for CGT when giving away, exchanging, losing or destroying part or all of an asset. |
| Entrepreneurs’ relief | Commenced on 6 April 2008 Given generally where an individual sells all or part of his trading business Available to trustees in some circumstances First 1 million of gains will be charged to CGT at only 10% Relevant conditions must be met for one year prior to disposal Gain is reduced 4/9ths, and then charged to CGT at 18% (to give effective rate of 10%) First 1 million of gains will be a cumulative lifetime limit although disposals on or before 5 April 2008 do not affect this limit |
| Capital Gains for Individuals | Ignore cost for assets held pre-31 March 1982 Instead use 31 March 1982 (market) value |
| Transfer of assets between husband & wife & civil partners | No CGT liability as long as parties are living together at some time in the tax year (you are considered living together unless legally separated and separation is likely to become permanent) |
| Transfer of assets between husband & wife & civil partners | No CGT liability as long as parties are living together at some time in the tax year (you are considered living together unless legally separated and separation is likely to become permanent) |
| Main or private residence relief | No CGT liability as long as parties are living together at some time in the tax year (you are considered living together unless legally separated and separation is likely to become permanent) |
| Enterprise Investment Scheme (EIS) relief | CGT deferral for reinvested gains |
| Venture Capital Trusts | As for EIS above |