Care Homes | Mitchells Chartered Accountants

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Recent publicity

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Most of us have, over the past weeks heard a great deal in the news about tax avoidance.? Interestingly whilst there has been a great many comments made by MP,s and political commentators it was very interesting to note that not one of them actually said that people or businesses using tax avoidance methods were legally doing anything wrong.? The objections were purely on a moral basis

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I have to say that a great many of our hard working clients who, by virtue of being in business and employing staff, also have a strong moral stance on the tax issue.? All of them are paying a substantial amount of tax by way of PAYE/NIC, VAT and corporation tax and also working for the Revenue as unpaid tax collectors!.? Almost without exception the moral issue they have is the fact that the same MP?s and political commentators are happy to turn a blind eye to the vast number of individuals defrauding the benefits system.? It is most demoralising to clients seeing their hard earned taxes being handed out to those who simply choose not to bother going to work, preferring Sky TV and premium strength lager as an alternative

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Government backed scheme

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However back to tax avoidance (which is totally legal) ? the current finance bill has now passed through the House of Commons and is currently in the House of Lords.? One part of the bill of great interest is the new Seed Enterprise Investment Scheme (?SEIS?)

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The SEIS scheme is designed to encourage investors to invest money in shares of relatively new UK companies.? The rules relating to what individuals and companies need to do to qualify are fairly detailed

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Tax relief

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Income tax

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Qualifying investors receive income tax relief at the rate of 50% of the amounts invested, as long as the shares are held for three years from the date of issue

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Example:

David invests ?30,000 this tax year in shares in an SEIS approved company, ?he therefore has SEIS tax relief of ?15,000 (being 50% of the investment).? His current year income tax liability is ?25,000, having made the investment he can now reduce this liability to ?10,000

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Capital gains tax

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Any shares upon which income tax relief has been claimed and the shares held for more than 3 years will be free of any capital gain on their sale

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Furthermore just for the current tax year to 5 April 2013 there is a facility to obtain capital gains tax re-investment relief.? If all or a part of the gain is re-invested in an SEIS qualifying investment then the amount re-invested is exempt from capital gains tax

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Example:

Sue sells an asset in June 2012 for ?80,000 making a chargeable gain of ?40,000, in the same tax year she invests ?30,000 in shares of an SEIS qualifying company.? As a result her taxable gain reduces to just ?10,000

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Who is this relief aimed at?

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New companies

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In order for investors to obtain the SEIS tax reliefs detailed above the company has to meet a number of conditions, the most common of which are detailed below:

• It must not have been trading for more than 2 years
• At the date of issue of the SEIS shares it must employ less than 25 employees
• It must have no more than ?200,000 gross assets
• It cannot raise more than ?150,000 under the SEIS scheme
• It cannot be controlled by another company
• The company must be UK resident

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There are indeed other less common qualifying factors contained in the legislation

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There is also a list of trades that do not qualify for SEIS, this is too long to repeat in this article but some of the more common activities include:

• Dealing in land
• Financial activities ? insurance, money lending etc
• Leasing or letting assets
• Property development
• Farming and market gardening
• Operating or managing hotels or comparable establishments
• Operating or managing care homes or nursing homes

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?The investors

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An investor can invest up to a maximum of ?100,000 in a single tax year spread over a number of companies

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Investors cannot control the company they are investing in and cannot have more than a 30% stake in a company

Source: http://www.mitchellsaccountants.co.uk/2012/07/government-approved-tax-avoidance/?utm_source=rss&utm_medium=rss&utm_campaign=government-approved-tax-avoidance

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