It is only permissible for a company to deduct expenditure in computing its taxable profits if incurred wholly and exclusively for the purposes of the trade. Since a company is a separate legal entity that stands apart from its directors and shareholders, it will not incur personal expenses. However, many companies, particularly ‘close’ companies (broadly…
It can make sense financially for directors of personal and family companies to borrow money from the company rather than from a commercial lender. Depending on when in the financial year the loan is taken out, it is possible to borrow up to £10,000 for up to 21 months without any tax consequences. However, if…
PAYE settlement agreements A PAYE Settlement Agreement (PSA) enables the employer to pay the tax and National Insurance instead of the employee on those benefits and expenses included within the PSA. This can be useful to preserve the beneficial nature of the benefit, for example in respect of a Christmas or other function falling outside…
Employing family members It is permissible for a business to claim a tax deduction for the cost of a reasonable wage paid to a family member who helps in the business. Their duties could, for example, include answering the phone, going to the bank, bookkeeping and other administrative tasks. The tax legislation specifies that ‘in…
In this article, we explain the tax aspects of using a works van If an employee is able to use a work’s van for private use, which generally includes home-to-work travel, there will be a taxable benefit and a subsequent tax charge. From 6 April 2019, the flat-rate van benefit charge has risen from £3,350…
The non-cumulative nature for calculating National Insurance Contributions (NICs) makes it possible to manipulate earnings to reduce the overall amount payable by taking advantage of the lower rate of primary Class 1 contributions payable once the upper earnings limit has been reached. For example, an employee who is paid £3,000 each month of the year…
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LIMITED COMPANIES: Because there is a difference between the tax rates paid by a limited company and those attracted by an individual, it can be very beneficial to trade as a limited company. The decision to incorporate should, however, only be taken after seeking professional advice.
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