Tax planning

Tax is a consideration in everything we do at gbac.

A great deal of tax can be saved by careful planning. Successive governments recognise the essential role entrepreneurs play in wealth creation. It’s the blood, sweat and tears (or more accurately the optimism, vision, innovation, determination and resilience) of the business community which creates the tax take and ultimately sustainable societal security (careful choice of adjective). Our politicians understand that the country must encourage UK businesses to drive the productive and gainful employment of the population. The multi-nationals can take their jobs anywhere in the world, and, of course, they do. It therefore falls upon the SME sector to provide this vital employment. Successive governments are showing increasing encouragement to make this country business friendly.

The tax landscape in the UK is therefore characterised by low business tax rates, a 10% capital gains tax rate for the first £10m per person of qualifying gains on business assets and some world beating reliefs specifically aimed at driving innovation and the much lauded knowledge economy.

Whether in emerging or traditional sectors we ensure every aspect of your tax position is carefully managed to help reduce the overall tax burden.

The guy in the pub may tell you that he doesn’t pay any tax but the reality is that the days of effective ‘schemes’ are long gone. Sound planning is required to take advantage of the legitimate reliefs available. If you’re into artificial schemes you’re not for us but we’ll pass you on to others who’ll gladly take your money for introducing you to trouble. You would be wise to ask the grateful recipients for a personal guarantee though but be careful to carefully manage your expectations.

Whilst the tax tail mustn’t wag the commercial dog, you shouldn’t pay more than you have to. That’s what charities are for.

Tax and the business cycle

Tax efficient fundraising

The Enterprise Investment Scheme (EIS) and currently the Seed Enterprise Investment Scheme (SEIS) encourage equity investments in qualifying businesses. This is a deliberate means by which to make available much needed capital to start up and growing businesses.

As an example, under SEIS you could invest £100k, receive £50k back in income tax relief and if available shelter capital gains saving a further £28k in tax meaning the investment would only cost you £22k. Any gain when the shares hopefully increase in value should also be free from capital gains.

Nothing short of remarkable! If you are looking for investment or have money to invest we can help.

We also have great working relationships with all of the major banks and contrary to public perceptions have found plenty of finance available over recent years.

Tax efficient investment and innovation

Enhanced R&D Tax Relief

Once you have secured your funding, investment on qualifying Research & Development expenditure can attract tax relief up to 225%, providing important cashflow for your development.

We can manage the claim process from start to finish.

Patent Box

Patent Box is a recently introduced relief aimed at innovative UK companies whereby a 10% Corporation Tax rate will apply to worldwide profits derived from qualifying patents. As well as retaining a significant amount of profits for the business this can also have a valuable knock on effect to the capital value of the business.

We are working with businesses with existing and pending patents and also companies who had previously been put off from patent applications.

The opportunity is wider than you may think, and the process can be straight forward with the right advice.

Capital allowances

These continue to be a valuable form of tax relief available to businesses incurring expenditure on capital items including (but not limited to) properties and plant & equipment.

There is currently 100% relief currently available on the first £250,000 of qualifying group capital expenditure each year.

Consideration should be given as early as possible in the thought process of any project to maximising the use of the above limit and allowances on construction costs and 100% first year allowances for certain energy and water saving capital expenditure.

Tax efficient structures

As businesses evolve structures should follow to protect assets from risk, reward and retain key management, raise investment and accommodate strategic plans.

Carrying out the necessary reorganisations without unpleasant tax consequences and maintaining one eye on potential exits is our bread and butter.

Share options provide a very powerful alternative to giving away equity to retain and motivate the management team with a sense of ownership in a very tax efficient and cash friendly approach.

Despite the recent negative press for some household names, it is good practice to consider the flow of transactions between international group companies and minimise the overall tax take. It is important to also be careful to stay on the right side of the now global transfer pricing rules which seek to avoid artificial manipulation.

Tax efficient exits

Groups of trading companies can typically sell subsidiaries for 0% tax under the Substantial Shareholding Exemption and shareholders can often benefit from the 10% Entrepeneurs Relief rate.

Advance planning to utilise these reliefs along with work to maximise the value of the business at the point of sale provide a fitting conclusion to the businesss cycle. Whether the disposal of shares is to the management team, the next generation, a trade buyer or a private equity firm, it is as certain as death and taxes.

It is another reality of life that well organised, systemised businesses that do not rely too much on the owner are less risky and therefore sell for a higher multiple with a shorter tie in period. Whilst we hope you will run the business happily for many years there are huge benefits in focusing on being sale ready from the start.