The availability of BPR combined with the ability to obtain a capital gains tax uplift in value on death has encouraged many business owners to retain qualifying assets until death.

However, handing on assets during your lifetime can provide certainty and security for the next generation investing their time, energy and money into a business. To enable a gift to be effective it must be made more than seven years before death and the donor must not reserve a benefit in the assets given away. To achieve this, you need to consider what future income you will need if the amounts received from the business are diminished.

A gift of property is also chargeable to CGT. Holdover relief may be available on certain business assets, but not all. For many businesses, they may have non-trading income (i.e. from property) and any gifts of this property would not qualify for holdover relief. Therefore, there would be a dry tax charge with no cash realised to settle the tax liability. In addition if death occurs within seven years of a gift, which results in an IHT liability, there is potentially a double charge to both IHT and CGT. This is because, where holdover relief has been claimed there is no CGT uplift in the base cost on death.

Planning now is of increasing importance. Examples include, but are not limited to:

• Maximising the £1m band for both spouses/civil partners
• Spreading assets between the family
• Trust arrangements
• Revising wills

When considering planning, the good news is that opportunities remain as other rules are not being amended, such as:

• The definition of a business qualifying for relief has not been changed
• The lifetime gifting regime so that gifts are exempt after seven years’ survivorship
• Capital gains tax reliefs on gifts, though in many cases not all assets will still qualify for reliefs as before
• Taper relief which will continue to reduce the IHT payable where death occurs between three and seven years of a gift.

We would be happy to help you with any planning so please contact us if you have any questions.

Loans to participators (broadly, securityholders) can be subject to tax in the lending company if they remain outstanding more than 9 months following the end of the accounting period in which they are advanced (known as Section 455 tax). The tax is charged on the company at the ‘higher dividend tax rate’ of, currently, 33.75%. This tax is reclaimable 9 months following the period in which the loan is repaid or otherwise eliminated.

The company should ensure it has paid Section 455 tax if required and track the loans accordingly to ensure the tax is reclaimed on a timely basis.

Similar implications can arise if a loan is made from a subsidiary company to a parent company in an owner managed business. If this is the case, we recommend you seek specific tax advice.

Finally, if interest is not charged to and paid by directors on a loan from a company at at least HMRC’s official rate of interest, a benefit in kind can arise if the loan is for more than £10,000.

Please don’t hesitate to contact us for more information if you are considering entering into a loan.

The rate of employer NIC has increased from 13.8% to 15% from 6 April 2025, and the point at which employers become liable to pay NIC on an individual employee’s earnings has reduced from £9,100 to £5,000 a year, resulting in an average increased annual cost of £615 per employee.

Employers must also provide a workplace pension to all eligible workers, contributing a minimum of 3% of qualifying earnings for automatic enrolment purposes.

As employer pension contributions are a tax efficient benefit, now is the time to consider whether top ups in employer pension contributions could deliver more value to the business and the employee now and in retirement.

Further whether a salary sacrifice arrangement could deliver employee pension benefits more efficiently or be expanded to include additional benefits – to maximise value, deliver employee experience, and align to market while mitigating rising costs.

A salary sacrifice is an agreement between an employer and employee where the employee agrees to a reduction in their salary in return for an employer benefit, for example:

• Employer pension contributions
• Cycle to Work scheme
• Additional Annual Leave
• Qualifying Workplace Nursery
• Electric Vehicle 

When implemented correctly, a salary sacrifice will result in a NIC saving for both the employee and employer and can also deliver income tax efficiencies for employees.

Designing an appropriate employee retention and reward strategy for your business is key, whilst also being flexible to adapt for change. It will only be effective if it delivers on employee expectation, stakeholders are aligned, and operational readiness understood.

We can help you make your remuneration package as tax and NIC efficient as possible by making use of HMRC compliant salary sacrifice schemes, so please contact us for more information.

There are certain tax-efficient share incentives designed especially to encourage companies to allocate equity to employees. A number of these are share option plans.

For example, the share option plan of choice for many smaller private companies is the Enterprise Management Incentive (EMI) Option Scheme. It is popular because it is flexible – allowing the plan to be tailored to the company and the workforce. And also because it can deliver a potential tax rate as low as 10%.

Following a recent relaxation in the rules Company Share Option Plans (CSOPs) also offer a popular alternative, especially if EMI is not possible.

If share options are not the right fit, then other share awards can be considered. Tax rules can make a straight-forward allocation of shares to employees difficult if the shares are illiquid but there are other ways forward to be considered. For example:

• Share Incentive Plan (SIP) another government approved initiative that allows an employer to award shares to employees and also for employees to purchase shares in their employer in a tax-efficient manner.
• Creating an internal market for shares such as creating an Employee Benefit Trust (EBT).
• Introducing a Growth Share Plan.

Alternatively, it is possible for a controlling interest in a company to be sold to an Employee Ownership Trust (EOT).  EOTs allow all employees to have an indirect stake in the company that they work for and – because government wish to encourage employee ownership they offer tax breaks for both the employees and the sellers (who can sell shares to an EOT without paying any tax).

If you have any questions about EMI options, planned business changes or any other share plans for your business, we can help.

Tax reliefs are an important part of the tax system that reduce the tax payable by companies or provide direct funding to certain companies and expenditures. The aim of the reliefs is to help the UK achieve various economic and social objectives, such as encourage investment in R&D activities. Over the past few years many tax reliefs have been under significantly more scrutiny to ensure that the right companies are receiving the reliefs and that there is sufficient 'return-on-investment'.

As a result, it has become more important that companies ensure that they meet all the conditions of the specific tax relief they are claiming and that the gather and keep sufficiently detailed evidence to support their claim.

We can provide guidance in respect of identifying eligible reliefs available and how to go about setting and maintaining accurate and detailed records to support a claim. Our expertise will help maximise any tax relief claim within the boundaries of the legislation and also help you navigate the ever-increasing complexity of regulations being applied to such reliefs. 

Our aim is to provide bespoke advice and support to a company and not take a 'one-size-fits-all' approach to any claims for tax relief. We also aim to fit our guidance within the wider tax implications and planning at company may have, or wish to have, in place.

Please do contact us if you wish to explore the potential tax reliefs available.

A business can expand overseas in a number of ways. Generally, there is a distinction between trading ‘with’ a country (or customers in a country) and trading ‘in’ that country.

Trading ‘with’ a country does not usually give rise to a taxable presence, although in some cases payments from that country are made net of tax deducted at source (withholding tax). This does not mean that a taxable presence has arisen.

Trading ‘in’ a country generally creates a taxable presence in the form of a permanent establishment, unless the activities are exempt. Domestic rules around what constitutes a permanent establishment do differ and therefore care needs to be taken. Broadly however a permanent establishment is created where a company has a ‘fixed place of business’ overseas or through a dependent agent (which can be an employee or contractor) which habitually exercises authority to conclude contracts on behalf of the company. The definitions of what constitutes a fixed place of business continue to evolve to adapt to the modern economy and ways of working and as a result are inevitably widening.

Where a permanent establishment is created (either through design or inadvertently) it will be important to formalise the arrangement and register for local taxes etc. It may be preferable to set up a local subsidiary as opposed to registering a branch. Local advice should be obtained.

From a VAT perspective the important factor to consider is whether the business owns goods in the overseas country, even if no local establishment has been created.  Sales of goods from the UK to overseas customers using incoterms Delivered Duty Paid (DDP) will require the business to register for the equivalent of VAT in the customers country.  For b2b services to overseas customers, most countries operate a Reverse Charge procedure that allows the overseas business to avoid local VAT registration. For b2c services, several countries require overseas businesses to register for local VAT.

HMRC regards employment status as high-risk for compliance and end clients or intermediaries may be exposed to unpaid income tax and NIC, which can be significant – with enquiries taking up time and resource to resolve.

End clients are responsible for determining employment status of contractors providing services via a PSC if they are medium or large employer, where two out of the three following criteria apply: 

• Turnover more than £15m
• Balance sheet more than £7.5m
• More than 50 employees 

Payments to contractors must be made under the Off Payroll Worker provisions where deemed employment status is determined with special “IR35” rules applied that are not the same as standard payroll processes. 

Where the worker is engaged in a supply chain comprising the end client, Agency, Umbrella company and PSC and IR35 applies the end client must apply income tax and NIC unless a Status Determination Statement is sent down the supply chain. From April 2026, where there is an Umbrella company involved in the supply of labour, the responsibility moves from the Umbrella company up the supply chain to the Agency or end client.

In the case of sole traders HMRC would approach the engager, for income tax and NIC not accounted for in the first instance, where an employment relationship is found to exist.

Employment status is a complex area which emphasises the importance of supply chain due diligence and correct onboarding procedures. We can help to make sure your processes are robust, and you are protected from contractor and HMRC challenge.

Failure to report a company car on a Form P11D to HMRC could result in penalties and interest on the late payment of Class 1A NIC for the business. With income tax also having to be settled to HMRC on a grossed-up basis, which can result in an employer liability of up to c.90% of the benefit value not declared for a higher rate taxpayer.

Cars made available to employees for private use under a salary sacrifice arrangement are reportable even if the employee covers the lease cost by the reduction in their pay. For electric vehicles the benefit in kind is the list price of the car multiplied by 3% in 2025/26 increasing by 1% each year until 2027/28. For other cars the benefit in kind is the higher of the list price multiplied by a percentage based on the vehicle’s CO2 emissions and the salary sacrificed.

A pool car/vehicle does not need to be reported to HMRC provided certain conditions are met:

1. The vehicle must be available to staff for business journeys to enable them to carry out their jobs. It must not ordinarily be available to one person to the exclusion of others.
2. Each vehicle must be available to and used by multiple employees.
3. They must not be normally kept overnight at an employees’ home.
4. Any private use must be merely incidental to the business use. 

All of the above conditions must be met for a car to be considered a pool car. 

We have a team of employment tax specialists who can assist with benefit advice and P11D compliance.

Directors are often paid under a standard consulting agreement which can expose the company to tax risks, where the payment for director services is not subject to income tax and NIC via the payroll.

Where however a director is also providing consulting services, it is possible for a director to segregate the duties between those of a director and the consulting services. Care needs to be taken in terms of the documentation and what then happens in practice, for example having separate contracts, and ensuring payments reflect market rates, can help mitigate the risk of challenge from HMRC in an enquiry or potential buyer as part of a tax due diligence.

Similarly, non UK tax resident Directors are also subject to income tax and sometimes NIC on their earnings relating to work they carry out in the UK.

Getting director pay right, including the associated income tax and NIC is fundamental for any business. HMRC would approach the employer for any underpayment along with interest and penalties.

We have a great deal of experience in HMRC’s approach to director pay and compliance and would be pleased to share our experience, to help you stay compliant.

As a business owner, ensuring the protection of your assets is always important to consider. One effective strategy to safeguard your business assets is by segregating them from your main trading activities. This approach not only mitigates risks associated with daily operations but may also help ready the business for a sale in the future if that is being considered.

Segregating business assets involves isolating valuable assets, such as property, intellectual property, and investments, from the core trading activities of your business. This separation is normally achieved through the creation of distinct legal entities that hold these assets. The primary purpose is to shield them from potential liabilities arising from trading activities, thereby protecting the overall financial health of your business.

There are several advantages to segregating business assets: 

• Risk Mitigation: By isolating assets from trading activities, you reduce the risk of assets being claimed by creditors in the event of financial difficulties. This ensures that valuable assets remain protected even if the trading entity faces legal challenges.
• Enhanced Focus: Separate entities allow for more focused management of the trading entity including for example being able to create an intercompany recharge for rent so as to give a clearer indication of the performance of the trade.
• Exit readiness: It may be possible that any future purchaser will not wish to acquire the property or investments. If so, having separated these valuable assets from the trade in advance will allow for a smoother separation in advance of any sale. 

Safeguarding your business assets through segregation is a prudent strategy that offers significant protection against risks associated with trading activities. We recommend assessing your current structure and your current measures to consider whether asset segregation could be beneficial.

Business Asset Disposal Relief (BADR) is available to reduce gains on qualifying share disposals from the main rate of 24% to 14% (disposals in the 2025/2026 tax year) or 18% (disposals made on or after 6 April 2026). Each individual has a £1m lifetime limit.

It is often possible and advantageous to transfer shares between spouses in order for to utilise BADR lifetime allowances and annual exemptions of both spouses but care is required and a review should always be undertaken from both a legal and tax perspective before any changes are made to share ownership.

When selling your business, the specific terms of your sale will determine how and when your tax is payable.

Where consideration is satisfied in the form of shares or certain types of Loan Notes often no tax arises at the date of disposal. It can be possible to make elections to accelerate the gain and realise a tax liability earlier but whether or not this is appropriate will vary depending on personal circumstance and the particular terms of the deal.

We also recommend that time is invested, prior to the sale, to review the company’s tax history (tax due diligence). In many cases it is possible to identify and remedy any issues. This not only prevents unexpected price adjustments but allows for a smoother sale process with fewer unexpected surprises.

If you would like more information please contact us for expert advice and support in navigating the complexities of BADR and securing the best outcome for your business.