Time to plan remuneration

Robert Leggett of chartered accountants Ensors explainsI KNOW that a number of businesses are struggling right now - the gaps on the high street tell me that. Survival may be a greater issue than remuneration planning, but bear with me!The biggest economic challenge facing the country whichever party comes into power is control of the budget deficit.

I KNOW that a number of businesses are struggling right now - the gaps on the high street tell me that.

Survival may be a greater issue than remuneration planning, but bear with me!

The biggest economic challenge facing the country whichever party comes into power is control of the budget deficit. There is no longer any doubt that tax rates will have to rise.

We are already promised a 50% rate of Income Tax and loss of personal allowances for high earners from April this year and higher National Insurance Contributions in 2011.

However, we should assume that this is only the start.

The present may come to be seen as a golden age, coming at the end of almost 30 years of falling headline rates of taxation. My advice to owner managed businesses able to do so is to think laterally (but within the law!) about what can be done now to avoid higher taxes in the future.

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My suggestions include:

n Consider your business structure - is this tax efficient? Would incorporation reduce your tax burden? Are shares held efficiently?

n Consider paying bonuses by April 5 - in some cases, the net pay could be loaned back to the business.

n Equally, consider paying dividends by April 5. Money can be lent back to the company.

n Where married couples or civil partners are in business together, it may be possible for profits or dividends to be such that the income of each is kept below the higher tax thresholds.

n Consider taking advantage of pension contributions now to avoid higher rate tax relief restrictions due in 2012 - but be aware of anti-forestalling provisions.

n Consider alternatives to pensions such as an Employer Financed Retirement Benefit Scheme (EFRBS).

n Partnerships and the self employed should consider the impact of capital and revenue expenditure on taxable profits and plan these to minimise their tax.

n Use share schemes and incentives where rewards come from capital gains rather than income.

n Consider tax efficient benefits for staff as an alternative to salary.

As always, professional advice will be needed to ensure that all commercial aspects are fully considered.

For further information or advice contact Robert Leggett on 01473 220008 or email robert.leggett@ensors.co.uk .

This information is given by way of general guidance only, and no action should be taken solely on the basis of the information contained herein. No liability is accepted by the firm for any actions taken without seeking appropriate professional advice.

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