EMI Scheme

Most share option schemes, with an eye to tax benefits, use the Enterprise Management Incentive (EMI) scheme.

For qualifying arrangements, there are tax incentives for the employer and employee.

The point to emphasise with EMI arrangements is that they can only be made by employers with their employees.

Unapproved option scheme

Unapproved share option schemes can be organised but there is no tax advantage for the recipient, who would be liable for income tax on the difference between the exercise price and the market value of options when exercised.

Employees may also be liable to pay NIC if the shares are readily convertible ta cash – for example, if a company is being sold.

However, unlike EMI arrangements, unapproved schemes can be offered to contractors, advisors, consultants and employees.

Growth shares

Growth shares provide the recipient with a share in the growth of the company from the date at which they were issued.

Recipients pay no tax on exercise of these arrangements but will pay capital gains tax when shares are sold.

Growth shares are useful if involving non-employees. They also minimise any dilution of value for existing shareholders.

Consider your options…

If you are considering an option or share scheme with key employees or other individuals, we can help. Please call so we can discuss the first steps.

The UK tax system does not allow families to spread the impact of taxation where there is one significant income earner providing for other family members.

For example, if one parent was earning £100,000, they will be paying income tax at 40% rates on almost £50,000 of their income when their partner and teenage children may have no income.

One strategy to consider in these circumstances is sharing taxable income with family members. Generally speaking, this option will only be available to the self-employed or owners of a limited company. If the major income earner is employed by a third-party employer there will be limited options to consider sharing these earnings with family members.

Self-employed options

It is possible for sole traders to convert their business into a partnership with their spouse/partner and divide the business profits between them.

There will be a number of issues to consider before undertaking this strategy:

• It is wise to have a commercial reason for the change.
• Combined tax and NIC savings need to exceed additional costs.
• Professional charges for taking care of a partnership and filing additional tax returns.

Limited company options

A spouse or partner taking shares or a directorship in an existing company will need to consider organising the issue or transfer of shares in the company and thus avoid triggering the ‘settlement legislation’. Settled property would be taxed as if the transfer had not taken place so no tax advantage would be achieved.

Employing a family member in the business

This is a perfectly acceptable strategy as long as there is a sound commercial reason for the appointment and rates of pay are in line with the usual rates for the type of work undertaken.

Other factors to consider if employing family members:

• Have a detailed job description, hours to be worked and rates of pay.
• Make sure that National Living Wage and National Minimum Wage levels are observed.
• There are limitations on the hours that can be worked by younger family members.
• Ensure that pension obligations are considered.

In summary

If you want to see if there is an acceptable way to bring members of your family into your business to reduce your family tax position and increase your family disposable income, we can help you create a feasibility study to quantify these savings. Please call for more information.

In a recent press release the Competition and Marketing Authority issued details of a poll of over 2,000 UK adults. According to the results of the poll:

• 7 out of 10 had experienced misleading online practices
• 85% believed businesses using them were being dishonest with their customers
• And 83% were less likely to buy from them in the future

Following the survey, the CMA has launched a brand-new campaign “The Online Rip-Off Tip-Off” to help shoppers spot and avoid misleading online practices that could result in them being misled or suffering financial loss.

With almost one-third of all retail purchases now taking place online, after the pandemic fuelled a surge in internet shopping, the CMA has become increasingly concerned about the impact of these “sneaky” sales tactics on consumers.

Research commissioned by the CMA shows that these practices, which are carefully designed to manipulate shoppers, can lead to wasted time and money, as well as anxiety and stress, and so cause significant financial and emotional harm. It revealed that 71% of people shopping online had encountered these tactics, and 61% described their experience as negative. This is exacerbated by the fact they are often hard to spot, and people don’t know how to avoid them.

The survey also revealed that, of those who had experienced misleading online practices, the biggest concern was about hidden charges (85% of respondents), followed by subscription traps (83%), fake reviews (80%) and pressure selling (50%).

Andrea Coscelli, the CMA’s Chief Executive, explained:

“As online shopping grows and grows, we’re increasingly concerned about businesses using misleading sales tactics, like pressure selling or hidden charges, to dupe people into parting with their cash.”

He added:

“None of us would accept these tactics in the real world. But we might not realise how much they influence what we buy online. So, we’ve launched “The Online Rip-Off Tip-Off” to help hand the power back to shoppers.

“We continue to crack down on practices that could break the law, such as fake reviews. But to tackle this problem from all angles, it’s vital shoppers are armed with the tools they need too. It’s only when we all know what these tricks are, and how they are designed to manipulate and mislead, that we are better equipped to avoid them.”

According to the UK-wide survey, many respondents reported that they had wasted money on a disappointing product or experience, spent cash they couldn’t afford or wasted time trying to undo the harm caused.

Apparently, February is the month that many homeowners take issue with their council tax banding in the hope and expectation that it will result in lower – not higher – council tax bills 2022-23.

Anticipating this, the Valuation Office, who oversee these reviews, have issued guidance. In their opening to a news story published 4 February 2022, they said:

“If you’re thinking about challenging your Council Tax band because you think it’s too high there are a few things to consider, in order to make sure you don’t spend time on a challenge that won’t be successful.

“Legally, we can only review your Council Tax band if you provide certain types of evidence to show your banding is wrong, or if it meets certain criteria. This evidence might include the addresses of similar properties to yours that are in a different band, or evidence of house prices which similar properties to yours have sold at.

“We cannot undertake such a review without any supporting evidence being submitted.”

Other circumstances that may qualify your property for a review include:

• If your property has changed – for example, it’s been demolished, split into multiple properties or multiple properties merged into one.
• If your property’s use has changed – for example, part of your property is now used for business.
• If your local area has changed – for example, a new supermarket has been built and has impacted the value of your property.
• If you’ve been paying Council Tax on your property for less than six months.

The Valuation Office Agency were keen to point out that your Council Tax band (as well as that of your neighbours) could actually be increased following a review as opposed to decreasing.

It is worth noting that council tax bandings can not only be influenced by the location of a property, but also on the size and characteristics of the building. This may help to explain why a neighbouring property is in a different band.

The Valuation Office Agency is only responsible for banding properties and entering them in the Council Tax list. Your local council sets rates and collects Council Tax payments. Any queries regarding billing or rebates should be addressed to your local council.

During the pandemic, businesses affected by COVID-19 disruption will have had their attention firmly focussed on survival. Certain sectors have suffered more than others with the hospitality, entertainment and leisure industries bearing the brunt of lockdown measures.

But what impact has this unprecedented period had on the value of your personal assets?

One thing we cannot change is the passage of time, and if not already retired, we are all heading in that direction.

The funds we are building to finance retirement need to be reviewed in much the same way that we examine the changes in our business balance sheets.

And are we aware that many of our decisions, unrelated to finances, may have an impact on our personal wealth?

For example, increasing the size of our family, or changing our marital or civil partnership status.

An annual review

We would recommend a focussed fact-find session to determine the assets and liabilities that make up your personal wealth balance sheet. Reviewed annually, or bi-annually, this will keep you up-to-date with your personal net worth. And will help to answer questions such as:

• Are your existing Wills and inheritance tax planning fit for purpose? Do they need changing?
• Is your wealth increasing or decreasing?
• What plans do you have that will impact your wealth creation strategies?
• What are the contingent risks arising from the sale of assets in future years – capital gains tax for example?
• Do you need to consider business exit planning?
• Are you on track to meet funding of retirement?

Planning note

If you do have contingent risks to consider – future tax payments for example – it is always better to plan a minimisation strategy before the events occur. And a key indicator to pin down these risks is to focus on creating wealth in tax-free zones and take advantage of all the available tax allowances and reliefs to which you may be eligible.

If you are inspired to take a look at these issues, please call so that we can consider your options.