Category Archives: Uncategorized

Family payments: deductible or not?

Family payments: deductible or not?

A 2018 tribunal case has ruled that payments a father made to his son for promotional work were not deductible for tax purposes. For the payments made to be deductible, they would have to be made wholly and exclusively for the purposes of the trade. Part of the issue was that regular wages were not paid in cash and the payments had an element of “parental affection”.

Employing family members, including children, is a well established tax planning tool for owner-managed businesses. Provided there’s a business reason for doing so, there shouldn’t be a problem.

Ensure you keep robust records to allow payments to be reconciled and linked to work done. Make sure that amounts paid don’t exceed what a third party would charge for the same work, and ensure that the work is actually necessary and is done.

Optimum tax efficiency in 2018/19

Optimum tax efficiency in 2018/19

From 6 April 2018 the dividend allowance will drop to just £2,000, coinciding with the annual shifts in the personal allowance and basic rate band.

6 April 2018 will see the latest uplift in the personal allowance and basic rate band. However, this year the dividend allowance (which is only two years old) will fall by 60% to just £2,000 per individual. The NI thresholds are also increasing.

Dynamic coding teething problems

Dynamic coding teething problems

HMRC’s new dynamic coding has been in place since July 2017, but a problem has been identified which has changed its operation slightly.

HMRC is pushing ahead with its Making Tax Digital (MTD)agenda. Whilst the main implementation for corporation and income tax has been delayed, the first element of MTD is already here. Dynamic coding (or PAYE Refresh) was implemented from July 2017.

In theory, dynamic coding aims to speed up the collection of tax via PAYE code adjustments, partly by making use of real time information (RTI) submissions.

Depending on the amount of the underpayment, issues can arise where circumstances change, but the code is not adjusted until later in the tax year.