Tax Planning Advice

There will often be tax consequences of a number of things you will do in your life: buying and selling properties, making investments, running a business, and even dying. Tax planning is simply identifying what the tax consequences will be in advance, so that you can be prepared. It also means you can sometimes choose from different ways of achieving a similar result so that your tax bill is kept down.

Tax planning is often complicated. This article isn’t able to give detailed tax advice, but simply to point out times when you might need to seek advice. For detailed assistance you would be best discussing your affairs with a tax advisor, who will charge for the advice provided.

When would you need tax planning advice?

Here are some typical examples, but they are not exhaustive:

1. Capital Gains Tax: if you sell a property which has always been your home, you would not normally have to pay any tax on any profit. But what if you have more than one property? Or you have a property but you haven’t always lived in it? There might be Capital Gains Tax on some of the profit you make. And there may be things you can do to reduce the amount of tax.

2. Inheritance Tax: when you die, if your estate is valuable, there may be Inheritance Tax to pay. If your estate is prepared to pay the tax, you may want to tax advice to be able to identify how much will go in tax. There are things you can do in advance of death (although of course you don’t know when that will be) that can reduce your estate’s tax bill. Tax planning helps you identify these opportunities.

3. Business Tax: how much tax you pay through a business will often depend on a number of things.
a. Whether the business is run through a company, or as a partnership, or as a sole trader can affect your tax
b. So too can how much you spend on equipment, and the dates when you actually spend the money can be important
c. Sometimes your accounts date can affect your tax bill
Tax planning can help you get these issues right.

4. Offshore tax planning: people often assume that it’s easy to get round UK tax by going offshore. It’s not always that simple. What happens if you want to come back to the UK for visits? Or if you have UK sourced income? It may help you to get tax advice about how much you can come to the UK without creating tax residence problems, and how you can structure your UK income to limit the amount of tax.

Tax planning is always about doing legal things. It is never about doing anything illegal.

H M Revenue & Customs recognise that certain tax planning techniques are perfectly acceptable. There are other things they see as “tax avoidance” — which means it is legal, but they consider it is using rules to get tax breaks which were unintended when the rules were created.

Where can I find a tax advisor?

Tax advisors work in a number of places:

• Many firms of accountants, especially the larger ones, will have tax advisors
• So too will larger firms of solicitors
• There are actually some tax advisors who practise on their own simply providing tax advice

By Gerry Jackson