Best Corporation Tax Tips for UK Entrepreneurs 2020

by | May 4, 2020


Corporation Tax falls due on the profits of UK companies regardless of the tax residency of the Directors and Shareholders – so we are often working with clients from abroad who are investing into the UK using a UK company as their ‘vehicle’. Our role is to ensure that everything that CAN be done to reduce the exposure to corporation tax, is done properly and within the rules laid down by HMRC.

It may be at odds with the advice that is given by other Advisors – and we may end up actually winding up the company in favour of some other ‘structure’. For example – with property portfolios, we can move the shares of the company into a tax exempt structure, then dissolve the company (in the correct way of course!) – this then takes the investment from being taxed under the UK Corporation Tax Regime into a totally tax exempt regime, so reducing the Corporation Tax on rental income to zero.

Where we are dealing with Trading companies, where profits are being earned, there are standard UK Pensions Rules that allow the Directors to make restricted contributions into a pension. These contributions might not make a lot of difference to the overall Corporation Tax issue, so something bigger and better is required.

In this case, we may be looking at trying to reduce the taxable profits from £1.8m down to £1.3m – so that Corporation Tax payments are not having to be made in advance. When the profits fall back below £1.5m the taxes can be paid in arrears, which has a dramatic impact on cash-flow.

We may well suggest contributions into special types of Self Administered Pensions (SSAS) – where personal limits in excess of the £40,000 ‘norm’ are possible. Of course if funds of £500,000 were to be deployed into a pension, there may still be a need for access to the funds within the trade. Which is why we can then set up loans to the company from the pension. Interest is charged and is also a trading expense, which again reduces exposure to UK Corporation Tax.

However, if we can get our planning in place early enough, we can make sure that funds are within other tax exempt structures and can be used in the most tax efficient manner. Here’s an example:

An entrepreneur has £2m to invest into a new trading venture. If he puts this £2m into one of the appropriate exempt structure, such as a QNUPS or X-Put the structure itself can lend money to the new venture and the interest is received tax free within the structure. If the structure also owns the shares, it can receive the dividends free from tax as well.

Having commercial loans in place can also reduce the value of a business for Inheritance Tax (IHT) purposes – especially where property is involved.

As with all things, there is nothing stopping a wealthy entrepreneur from managing their affairs so that there is very little corporation tax payable on their investments, trades and even large property portfolios.

Most Advisors, such as IFA’s and Accountants do not have the internal experts to assess a client’s FULL situation – and come up with the best overall strategy.

As I have worked in the tax planning field for over 30 years, I have personal access to experts in all taxes and can combine these experts into a unique service that really does go beyond what you’d get from your normal ‘Advisors’.

Every wealthy entrepreneur or property investor I have ever met had their own Accountant, Solicitor and Financial Advisor – yet in 90% of cases we were able to dramatically able to improve their overall exposure to UK taxes.

What is vital is the proper implementation – with care at every stage.

This is why we offer a FREE consultation – as it lets us explore the current situation before jumping in with ‘solutions’.

If you are interested in reducing your current and/or future income tax exposure, do not hesitate to call or email us now.