In business everything is run by dates.
There are so many filing and payment dates its hard to keep track of them and if you are an accountant the problem is multiplied by the number of clients.
We use inform direct for all the companies we work with, its a brilliant system that monitors everything for you and helps you produce the paperwork needed.
On their website they have published the 2018 Review of UK Company Formations
634,116 new businesses were formed in the UK in 2017.
52,411 businesses registered in Dorset at the end of 2017.
Property Flipping and Development are Trades (not investments), so YES, they could qualify for Entrepreneurs Relief.
You may be able to pay less Capital Gains Tax when you sell (or ‘dispose of’) all or part of your business.
Entrepreneurs’ Relief means you’ll pay tax at 10% on all gains on qualifying assets.
Work out if you qualify
You’ll qualify if you dispose of any of the following:
- all or part of your business as a sole trader or business partner – including the business’s assets after it closed
- shares or securities in a company where you have at least 5% of shares and voting rights (known as a ‘personal company’)
How does Entrepreneurs Relief help?
Let’s take an example using a Company
Flipping or Development Profit £100,000
Corporation 20% £20,000
Profit after Tax £80,000
If close the business and you apply Entrepreneurs Relief the you will pay 10% tax = £8,000
You will also get your CGT allowance of £11k deducted first.
Without Entrepreneurs Relief the tax would 20% or even more if the distribution was via dividends or salary. For unincorporated businesses the tax could be 20%, 40% or 45%!
What are the rules for ending a business?
- The business has ceased.
- The assets were in use at the time of cessation.
- The business was owned for 1 year by the individual prior to cessation.
- The assets were disposed of within 3 years of cessation.
- The assets are not held as investments.
However, if you do the same thing within 2 years HMRC may consider that you are only doing this to gain a tax advantage and it could then be treated as income.
Click here to access the spreadsheet
What is a Limited Company?
A limited company is an organisation that you can set up to run your business – it’s responsible in its own right for everything it does and its finances are separate to your personal finances.
Any profit it makes is owned by the company, after it pays Corporation Tax. The company can then share its profits.
What is a Sole Trader?
If you start working for yourself, you’re classed as a self-employed sole trader – even if you’ve not yet told HM Revenue and Customs (HMRC).
As a sole trader, you run your own business as an individual. You can keep all your business’s profits after you’ve paid tax on them.
You can employ staff. ‘Sole trader’ means you’re responsible for the business, not that you have to work alone.
You’re personally responsible for any losses your business makes.
The key Advantages and Disadvantages of Companies are shown below.
How do you form a Limited Company?
You can form your company directly with Companies House for £15, it normally takes 24 hours
- the company’s name and registered address
- names and addresses of directors (and company secretary if you have one)
- details of shareholders and share capital
Personally, I find it easier to use a formation agent such as Company Wizard for £16.99
Often using an agent will mean the company is formed quickly, sometime within a couple of hours.
What are the next steps?
Once your company has been formed you need to:
- Open a bank account for the Company, this can often take a couple of weeks
- Register for Corporation Tax
- Register for other taxes (if they apply to your business) – VAT, PAYE, CIS
- Appoint an accountant (recommended but not compulsory) – Form 64-8
- Set up your accounting software
- Create shareholder agreements, contracts and other legal documents (if required)
A demerger is a form of corporate restructuring in which the entity’s business operations are segregated into one or more components. (Wikipedia)
Demergers are not defined in Tax Law but can be successfully used by Trading Companies and do get special tax treatment.
A demerger is a series of transactions which have the effect and purpose of dividing the trading activities carried on by a single company or group of companies between two or more companies or groups of companies. CTA10/S1075 and TCGA92/S192 provide special tax treatment if certain conditions are met. Companies may seek advance clearance under CTA10/S1091 that proposed transactions will be an exempt demerger. CTM17200 onwards gives further guidance on the action to be taken by local offices in dealing with demergers.
Basically there are 3 ways to do Demergers
- Distribution in specie – CTM17250
- Reduction in Capital
Property Investment Companies are not trading companies so demergers are extremely complicated as explained in this article in Taxation
On the 21st February 2012, the European Union defined a new category of company, the ‘micro-entity’. Micro-entities are very small limited liability companies and qualifying partnerships.
Micro companies are those not exceeding two out of three of:
- Balance sheet total: £289,415 (€350,000)
- Net turnover: £578,830 (€700,000)
- Average number of employees during the financial year: 10 (or fewer)
Subject to certain conditions, the Micros Directive permits Member States to relieve micro-entities, from the obligations to:
- present “prepayments and accrued income” and “accruals and deferred income”
- recognise certain types of “prepayments and accrued income” and “accruals and deferred income”
- draw up notes to the accounts
- prepare an annual report
- publish annual accounts provided the financial data information contained in balance sheet items is filed with a designated competent authority.
The Government is seeking to make changes to the Companies Act 2006, and to the accounting regulations made under that Act and under EU law to implement the EU Directive 2012/6/EU of the European Parliament and of the Council (“the Micros Directive”). It would also make comparable changes to the accounting framework for Limited Liability Partnerships.
The ICAEW believes the lack of transparency and dearth of financial data would lead to more rejections of credit to these smaller organisations.
“We have a number of concerns about the suggested changes, as they may result in less transparency and less useful financial information. This, in turn, can over time have a negative impact on market confidence and on micro businesses’ ability to access finance, at least at the margins,” says Dr Nigel Sleigh-Johnson, head of the ICAEW’s Financial Reporting Faculty.
What do you think?