Manchester City Council has launched a new scheme to help businesses in Manchester affected by the recent riots. The package includes temporary business rates reductions. Further help is available to small and medium-sized enterprises. This includes helping to meet the cost of repairs and recovery, and marketing to help attract customers back into the city centre. Some businesses may also be eligible for grants of up to £2,500 or loans.

The scheme is available not just to businesses which suffered damage in the riots, but also those whose trading has been affected in the aftermath.

This Council scheme runs alongside other private initiatives. For example, Network Rail is offering special terms and shorter leases to smaller businesses who need temporary accommodation following damage to their own premises.

Details of the Council scheme can be found on its website.

The UK has reached an agreement with Switzerland designed to prevent UK taxpayers illegally evading UK tax by hiding money in Swiss bank accounts. Either UK account holders must authorise full disclosure to the Revenue, or they must suffer a tax deduction imposed by the Swiss authorities on behalf of the UK.

From 2013 the Swiss authorities will deduct 48% tax from investment income and 27% tax from capital gains. The devil will lie in the detail, not yet published, but these are eye-watering rates. One is reminded of Denis Healey, as Labour’s Shadow Chancellor in 1973, predicting “howls of anguish” from the rich. (He is commonly misquoted as saying that he would squeeze the rich until the pips squeak, but he did not say that.) But this is a Tory Chancellor who is now provoking howls of anguish!

Howls of anguish? You’ve heard nothing yet! If you had a Swiss bank account on 31 December 2010 (and still have it on 31 May 2013) you will suffer a one-off tax charge in the range 19% to 34% of all your Swiss funds, to cover any arrears of income tax, capital gains tax, inheritance tax, and VAT that you may have evaded. Ouch!

A recurring tax planning question is whether a business should be operated as a sole trader or partnership, or through a limited company.

Personal taxation levels are high with a theoretical effective tax and NIC rate of 69% for those earning £100,000 to £114,900.

Company tax rates are on their way down.  Profits up to £300,000 are charged at 20% and over £1.5m at 26%. The effective rate on profits between £300,000 and £1.5m is 27½%. By 2014 the top rate is set to be 23%.

At face value, a company seems more tax effective.  The problem of course is how to extract profits out of a company tax-efficiently because an individual still has to pay income tax on income extracted. If tax rates remain as announced, it is reasonably clear that payment of dividends rather than a salary gives the business owner the minimum tax from these conventional strategies. On this basis, running a business through a company saves tax overall in most or many cases. If profits are not extracted but instead reinvested, operating through a company reduces the tax further.

Of course there are other issues to consider. Operating through a company is probably more expensive in compliance costs (statutory accounts and other obligations) and has more legal restrictions (the funds belong to the company not the business owner). Company cars are a tax expense that must be factored in. On the other hand, an existing unincorporated business might become a limited company and in some circumstances enable the business owner to extract profits at just 10% tax.

More sophisticated structures are possible, combining perhaps Limited Liability Partnerships with limited companies. For conventional limited companies, more sophisticated profit extraction techniques may be available.

On balance, a trading business operating as a limited company is probably more tax-efficient than self employed status. Each case should be considered on its merits, particularly if a business sale is planned or is imminent. Tax may not be everything, but minimising it can make a difference.

Colin Tice, tax partner at Cassons chartered accountants and business advisers

The Government has announced a programme of business rates reductions to help businesses affected by the recent riots. More importantly, the deadline for claiming under the Riot (Damages) Act has been extended from 14 days to 42 days. This is clearly valuable for uninsured (or underinsured) businesses. But it may also matter for insured businesses. Many insurance policies require claims for riot damage to be made within 7 days (so that the insurers then have a further 7 days to claim under the Act). Some businesses may have claimed too late. It remains to be seen how insurance companies will react, but it would seem proper for them to extend their own limits.

The Riot (Damages) Act dates from 1886, but is still on the statute book. Claims are paid by the police. Ultimately, the cost will be borne by all council tax and business rates payers.

On 26 July, we blogged that HM Revenue & Customs (HMRC) had failed to issue all of the July Self Assessment Statements of Account in time for the 31 July payment deadline. At the time, HMRC apologised and said that anyone who received a Statement late, would get 30 days from the date of receipt to pay their tax before any interest would be charged. (Interest would normally be charged on any amount outstanding after 31 July).

HMRC has now issued a further announcement which says that, for those taxpayers who receive their Statement in August, no interest will be charged provided the liability has been settled by 27 September. This does seem quite generous – although HMRC hasn’t said when the last of the delayed Statements should be issued!

The Bribery Act came into effect on 1 July. If you are in business, you need to know about it and to comply with it. You may not make the headlines. They are reserved for the likes of Alstom, who have denied allegations that they paid £81m in bribes; or Macmillan, or who have just agreed to pay £11m to avoid prosecution for bribery. But there are no lower limits. And there is nothing to prevent a competitor from complaining that they lost out because you offered lavish hospitality or some other inducement in order to win a contract. Or a supplier could complain that you preferred one of their competitors because you (or one of your staff) received disproportionate hospitality. Be aware, and be prepared!

Please read our fact sheet below for further details.

Click here to download:

Bribery_Act_fact_sheet.pdf (60 KB)