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Use of home as office allowance

Background: During the COVID-19 pandemic many people have been required to work from home.  HMRC relaxed the conditions and made it easier for employees to be able to claim the use of home as office allowance of £6 per week.  Whilst this is welcome news, in real terms it is just £1.20 per week for basic rate taxpayers.

How we helped: As well as ensuring that everyone who qualifies makes the claim, we have also been reviewing clients affairs to see whether it is possible for them to make a larger claim, to reflect the actual expenses they have incurred.

Using a spreadsheet model we created, we can calculate the claim for self-employed persons, based on their monthly outgoings.  Self-employed persons can make a claim for use of home based on their actual expenses whereas employees, as mentioned above, can only claim the £6 per week.  

For directors of personal companies, we have been looking at using the above basis to make a claim in the company’s accounts by charging rent from the director/home owner.  This is slightly more involved but it can result in a more representative claim for costs incurred when working from home. 

Appraisal of succession issues

Background: The owners of a practice, who were considering the firm’s succession plan, wanted to know the value of the business and the options available for passing on the reigns, including possible third party sales.

How we helped: We started by reviewing the firm’s financial details to help the owners understand the value of the practice based upon our detailed knowledge of the sector and the current merger and acquisition activity that we are seeing. We compared this to offers from third parties to assess their merits. We then looked at the firm’s succession options internally and how they might play out both from a financial point of view and in shaping the firm going forward. This enabled the owners to take a more rounded view of the firm’s succession and devise a plan that worked best for the business going forward.

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Buying out a retiring owner

Background: A shareholder wished to retire from the practice and negotiations were underway for the company to purchase his shares. The tax implications had not been fully considered and the practice wanted to ensure the best outcome for the shareholder.

How we helped: We explained the conditions to be met for the shareholder to benefit from capital treatment, i.e. for the payment from the company to be subject to capital gains tax rather than income tax, and the type of deal that would be likely to be given approval by HMRC. We also considered whether business asset disposal relief would apply to secure a 10% tax rate. We helped the practice shape the deal to arrive at a point where the company and the shareholder were happy with the terms and HMRC gave approval for capital treatment.

Introduction of a holding company

Background: The owners of a successful practice were concerned about the operational risk to which the company’s assets were exposed.

How we helped: We advised on the introduction of a holding company into the ownership structure, into which the assets could be transferred and held separately from the trade. We dealt with the HMRC clearance application to ensure there were no adverse tax implications for the company or the owners and dealt with all company secretarial matters required to form the holding company, execute the exchange of shareholdings and file the necessary paperwork with HMRC and Companies House.

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CBILS and reforecasting

Background: The cash requirement for additional funding has been essential for a number of law firms over the past year. In the most part this has been for a safety blanket due to the unpredictability of the pandemic. But for some this additional funding has essential and ensured businesses can continue.  

How we helped: Firms have been unable to accurately show how the pandemic might affect them and so we have prepared detailed forecasts to incorporate all business expenses and owners’ remuneration, showing a number of difference scenarios.

This helps to give strong evidence that funding is required for the benefit of the business but also gives confidence that the business will improve its position had funding not been secured.

Getting tax affairs in order

Background: We are often approached by taxpayers who are looking at getting their tax affairs in order. Over the years HMRC have issued various disclosure facilities to enable taxpayers to do this without punitive penalties. This can be a big worry for people, whether they have received communication from HMRC or not. Generally, we find that people want to pay their share of tax and ultimately be able to sleep at night.  

How we helped: We prepared and submitted disclosures to HMRC and advised taxpayers of the amount to pay. After getting the taxpayers affairs in order some have no further need of our services, but many stay on as clients and we help them to keep up to date with their compliance requirements.

We are also able to advise clients on ways to structure their tax affairs and mitigate their tax liabilities going forward.

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Practice merger

Background: The owners of two law firms (both of which trade as a limited companies) of differing values were looking to merge into a single trading entity, and wanted to understand the options available to achieve the merger and the potential tax implications.

How we helped: We explained the various ways the merger could be achieved, the financial implications for both parties and the potential tax liabilities that might arise. We advised on the reliefs available to minimise the tax exposure and the HMRC tax clearances that could be obtained to give certainty on the tax position, and summarised the options with a clear list of advantages and disadvantages so that the owners could make an informed choice on how to proceed.

We also looked at the impact for professional indemnity insurance for the future practice for each option and the general commercial  and regulatory issues that they would need to consider.

Key contacts

Jon Cartwright
Jon Cartwright
Partner
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Patricia Kinahan
Patricia Kinahan
Partner
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Andy Harris
Andy Harris
Partner
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