Wanted: Good accountant or tax person

[Mr Fro]

Anyone on here in the tax/money business or know a good bod?

I'm negotiating the sale/licence of an invention (and IP) so I need to know the most "tax efficient" way of proceeding as I don't want to lose 40% to the tax man.

I've done a bit of reading on tax laws but the HMRC guidelines are as interesting and complex as a nested excel formula...

Cheers,

Fro

[Bogof]

I'm negotiating the sale/licence of an invention (and IP) so I need to know the most "tax efficient" way of proceeding as I don't want to lose 40% to the tax man.

 

http://www.accountingweb.co.uk

[Joeman]

I use a limited company to avoid the 40% tax. Tax is then limited to corporation tax rate of 20%.

[Mr Fro]

Thanks for the link. I'd seen the corporation tax stuff - don't know if it's a bit iffy to start a company, receive cash, withdraw cash then dissolve the company in a short space of time...

[Joeman]

Thanks for the link. I'd seen the corporation tax stuff - don't know if it's a bit iffy to start a company, receive cash, withdraw cash then dissolve the company in a short space of time...

Why dissolve it? Keep the company alive so that you can draw the dividends over the next few years.

If you dissolve it right away, you'll draw the cash and have to pay tax so no point dissolving in the same tax year.

[Bogof]

Thanks for the link. I'd seen the corporation tax stuff - don't know if it's a bit iffy to start a company, receive cash, withdraw cash then dissolve the company in a short space of time...

Why dissolve it? Keep the company alive so that you can draw the dividends over the next few years.

If you dissolve it right away, you'll draw the cash and have to pay tax so no point dissolving in the same tax year.

 

Using the limited company vehicle there's a risk of having to pay tax twice, unless the "dividends" are drawn by a low earning non-taxpayer.

[wr6133]

Thanks for the link. I'd seen the corporation tax stuff - don't know if it's a bit iffy to start a company, receive cash, withdraw cash then dissolve the company in a short space of time...

 

You would have to play the slow game taking the money out yearly as Dividends, if you tore the cash out as a lump you would get taxed on it. Only way to get it out faster is to have some people you can 100% trust also being part of the company and for them to take dividends too (and hand you the cash). If this is a big sum and you want access to it quick then a company would not be the best way.

[Joeman]

You can take a tax free lumpsum by taking a directors loan thats paid back by declaring dividends in the next tax year.. Also your newly formed company will need various things to operate (new laptop, share of home internet connection, use of home office etc etc) so you can claim expenses against the company to extract more cash.

[wr6133]

Also your newly formed company will need various things to operate (new laptop, share of home internet connection, use of home office etc etc) so you can claim expenses against the company to extract more cash.

 

Assets are deducted from profits (so reduce tax). Expenses are different. Laptops, furniture, etc are assets and follow capital allowance rules in ref. to the value of the asset and the amount deducted from profit to lower tax burden. Expenses are things like printer ink, coffee, etc or the book definition "a business expense must be necessary and that is wholly and exclusively incurred as part of the day to day running of your business" (but does not meet the criteria for an asset). Further more there are tax deductible and non tax deductible expenses, obviously tax deductible is best as it comes off the profit, so lowers your tax burden further. Fiddling expenses to extract cash is a bad idea (though a common one).

You won't pull meaningful amounts of cash out of a business via assets and expenses unless you are being somewhat "creative", though being "creative" may not be looked upon with awe if HMRC want to see the books.

Not saying a limited company is a bad idea (it's a good one) but if this is a onetime big wedge of cash it will take a while to actually extract it all legitimately that way while minimising tax.

(wife has nearly qualified as an accountant and she gets me to read her books and test her so I've absorbed a silly amount of pointless info, though I'm far from knowledgeable)

[Bogof]

If this is a big sum and you want access to it quick then a company would not be the best way.

 

If it's a big sum you may need to VAT register the company.

And... if you earn over your threshold elsewhere, you may end up getting taxed on dividends.

And... I would hope and expect HMRC to ask why on earth would an otherwise dormant company (beyond year 1) need to share an internet connection. Or an office.

Speak to an accountant. A motorbike forum is probably not the best arena to get accurate tax planning advice.

[Mr Fro]

Thanks everyone for the input! You see, these are all solid reasons for me needing some pukka advice as I have very little knowledge of this sort of financial stuff.

Bogof - The initial post was asking for someone in the business, not for generic advice although there have been some very interesting points raised by people who have experience in such matters.

[Joeman]

Also your newly formed company will need various things to operate (new laptop, share of home internet connection, use of home office etc etc) so you can claim expenses against the company to extract more cash.

 

Assets are deducted from profits (so reduce tax). Expenses are different. Laptops, furniture, etc are assets and follow capital allowance rules in ref. to the value of the asset and the amount deducted from profit to lower tax burden. Expenses are things like printer ink, coffee, etc or the book definition "a business expense must be necessary and that is wholly and exclusively incurred as part of the day to day running of your business" (but does not meet the criteria for an asset). Further more there are tax deductible and non tax deductible expenses, obviously tax deductible is best as it comes off the profit, so lowers your tax burden further. Fiddling expenses to extract cash is a bad idea (though a common one).

You won't pull meaningful amounts of cash out of a business via assets and expenses unless you are being somewhat "creative", though being "creative" may not be looked upon with awe if HMRC want to see the books.

Not saying a limited company is a bad idea (it's a good one) but if this is a onetime big wedge of cash it will take a while to actually extract it all legitimately that way while minimising tax.

(wife has nearly qualified as an accountant and she gets me to read her books and test her so I've absorbed a silly amount of pointless info, though I'm far from knowledgeable)

 

You are correct. However, with everything online these days, any newly formed company needs a computer in order to file its accounts, check its email, etc etc, so a laptop computer and a new printer are perfectly valid purchases for any newly formed company.

Buy top of the range macbook pro and that's a couple of grand extracted from the company in the form of a useful asset.

[Joeman]

And... I would hope and expect HMRC to ask why on earth would an otherwise dormant company (beyond year 1) need to share an internet connection. Or an office.

 

Everything is filled electronically these days, salary needs to filled real-time, vat quarterly, etc etc... so without its own IT equipment, how can the company expect to operate?

And where does the company expect to keep its IT equipment and files full of important paperwork that it needs to be kept for 7 years?

The company cannot expect the director to keep these assets and paperwork at his own home taking up space without compensating him for it.