Hawsons set for football on the international stage

Hawsons set for football on the international stage

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Hawsons’ partners set for football on the international stage

Two Hawsons partners, Stephen Charles and Scott Sanderson, have been selected to play in an International ‘World Cup style’ tournament in Antwerp, Belgium.

Stephen and Scott will represent the UK team of HLB International – a worldwide network of independent professional accounting firms and business advisers to which Hawsons belong – competing against other HLB teams from member firms in Ireland, Holland, Norway, Sweden, Belgium, Denmark and Germany.

This year’s tournament, which takes place later this month, is running for the fifth year in a row and comes after recent successful tournaments in the UK and Denmark.

Speaking about the tournament, Scott said: “This tournament is a good opportunity to meet up with European colleagues and strengthen relationships – whilst also beating them at football! The UK team have been losing finalists in the previous three tournaments so we are hopeful for a different outcome this time around.”

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Stephen is a tax partner at the firm, specialising in corporate and business taxation and has responsibility for Hawsons payroll department, as well as being captain of the Hawsons cricket team! He is a qualified chartered accountant and chartered tax adviser and has been at Hawsons since 2007, previously working at a national firm.

 

 

Scott Sanderson

Scott is the partner responsible for looking after the firm’s Healthcare & Medical sector clients and has worked at Hawsons throughout his career. During his time at the firm Scott has developed his expertise across a number of departments including audit, business services and payroll and now acts for both corporate and non-corporate clients.

Owning a property via a company – big tax changes!

Owning a property via a company – big tax changes!

Owning a property vis a company – big tax changes 

Last month, at the annual HLB International Audit & Tax Conference in Amsterdam, I spoke to member firms about the current real estate developments in the UK from a tax perspective. There have been some big changes recently, including Stamp Duty Land Tax (SDLT), the Annual Tax on Enveloped Dwellings (ATED) and ATED-related Capital Gains Tax (CGT); all of which have led to many with high value residential properties questioning: am I structured in the most tax-efficient manner? It is important that you look at the key tax considerations if:

  • You are looking to buy a home and are considering the pros/cons of buying it in your company or taking money out and buying it personally (scenario 1)
  • You have a company-owned home and are considering whether it is still tax-efficient to hold it in the company (scenario 2)

First, let’s look at the various property taxes you need to consider.

Stamp Duty Land Tax (SDLT)

As it now stands, SDLT is payable at the rate of 15% when a company (i.e. non-natural person) acquires a UK residential property valued at more than £500,000. In contrast, when the purchaser is an individual the rate of SDLT is tiered with a 12% rate only applying over £1.5m

Benefits in Kind (BIK)

BIK are benefits you receive from your company which are not included in salary/wages, such as a company car, medical insurance or use of a home. Some BIK are tax-free, but accommodation is not, and it could lead to a significant tax liability. The amount of BIK tax due on a home depends on a number of factors, including the rent the occupier pays (if any), the value of the property and the cost of the property if bought by the employer.

An Annual Tax on Enveloped Dwellings (ATED)

ATED is not a new tax, but it has changed considerably since its introduction in 2013.  Essentially, ATED is payable by companies that own UK residential property (a dwelling) valued above a certain amount, as the below table shows. This tax is payable each year.

ATED figures

At first, ATED only really caught London properties, but with the properties valued between £1m – £2m now included from April 2015 (and with properties valued between £500,000 – £1m to be included from April 2016) the tax has been given a much wider scope and will affect many more companies north of the capital. Companies in the North and the Midlands really need to take note.

As well as its scope, the annual chargeable amounts for ATED have also increased significantly from April 2015 – by 50% above the usual yearly increase in line with the Customer Prices Index (CPI).

ATED-related Capital Gains Tax

Thinking of selling your company-owned property?

If your company falls within the ATED rules and pays annual tax, then you will need to watch out for ATED-related capital gains on the sale of the property. High value UK residential properties that are subject to ATED are also subject to 28% UK capital gains charged on profit (overriding the normal 20% corporation tax) when the property is sold.

Review your property structure after ATED

ATED capital gains only applies to a property’s growth in value between 6 April 2013 (or the date on which the property first comes within the ATED regime) and the date of the sale.

Scenario 1: You have made some money in your company following the recession and now you want to buy a second home. Do you take the money out and buy it personally or buy it in the company?

With the changes to various property taxes and, in particular, the substantial increase in the ATED annual chargeable amounts, each situation must be carefully considered in its own right.

There are quite a few considerations you will need to make in addition to the ATED annual charge. You will be subject to a flat rate of 15% SDLT when purchasing the property into a company, as opposed to a much lower rate when purchased personally. This will make a big difference if your property is valued under £1.5m. For example, a property valued at £850,000 will be subject to under 5% SDLT.

As well as those points, you may also find that buying the property personally may be more beneficial when it comes to the sale of the property, particularly if this is your only residence and would be exempt from capital gains tax. Even if you are only just purchasing the property, thinking ahead early on could save you a big headache in the future! Those properties that are subject to ATED are also subject to 28% ATED-related capital gains charged on profit, rather than the usual 20% corporation tax, when the property is sold.

All of this seemingly points towards always buying the property personally. However, if you decide to take the money out of the company to do so – whether that is as a salary or dividend – you will be subject to income tax, which could be as high as 45%. Recent changes to the way dividend income is taxed will, from April 2016, also significantly reduce the tax advantage of taking dividends rather than salary, particularly for those extracting large sums from the company.

Scenario 2: You have a company-owned home and you are now considering whether it is tax-efficient.

You will also need to consider all of the above points, including ATED, SDLT, BIK, ATED-related capital gains if you currently have a company-owned home.

In particular, your annual tax charges are now likely to rise, whether that is due to an increase in your existing charge or a new charge as you become subject to ATED. The increase in ATED for the higher end of residential properties is particularly noteworthy and will make a considerable difference year-on-year. Because of this you may be looking to take the property out of the company, either by selling it to a third-party or selling it to yourself.

If you choose to sell the property to a third-party you may be subject to ATED-related capital gains, depending on the value of the property. If the property is valued between £500,000 – £1m then you could save 8% tax on the sale of your property if it is sold before that threshold comes into the ATED regime in April 2016. If your property is already subject to ATED then you will have to sell at the higher ATED-related capital gains rate.

If you choose to take the property out of the company by selling it to you, you have two options. Firstly, you may wish to do this as a dividend, although, as mentioned earlier in scenario 1, the recent announcement of planned changes to the way dividend income is taxed will significantly reduce the tax advantage of this form of remuneration. Taking it as a dividend should avoid any SDLT. The second option would be to take remuneration in the form of the property, but this is not usually as tax efficient.

In summary – is your structure right?

Now is the time to think ahead and plan strategically if you have, or are thinking about having, company-owned property. As properties valued between £500,000 – £1m are to be subject to ATED annual charges from April 2016 and the fact that the forthcoming changes to the way dividend income is taxed will significant reduce its tax advantage, it is essential to start thinking now.

The changes are likely to have a substantial impact on how you structure things. As the two scenarios above have shown, there are a number of options available to you, each of which needs to be carefully considered. We recommend you take advice as soon as possible.

More from our tax experts

You can find all of our latest tax articles and tax resources here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Hawsons makes history after 160 years in business

Hawsons makes history after 160 years in business

Hawsons is one of the longest standing firms of independent chartered accountants in England

Formed in December 1854, Hawsons celebrates 160 years of providing expert advice to businesses of all types and sizes. Our clients know that irrespective of how small they are when they become a client or how large they grow; Hawsons will always be there for them.

With around 100 staff across three offices in Sheffield, Doncaster and Northampton, Hawsons provides the breadth of expertise of some of the largest firms of accountants. Just as importantly, Hawsons also provides the highest quality of service and personal delivery of a local independent firm that is increasingly sought after by today’s successful business owners.

Speaking about this momentous year for the firm, Martyn Weatherall, Senior Partner said:

“We’re proud of our extensive history and the success we’ve achieved since we were founded in Sheffield 160 years ago. Especially with the difficult economic circumstances of recent years, to have reached such an age and still be going strong is a great feat. Despite our company’s growth and expansion into other areas across the UK, we’ve stayed true to our philosophy that no matter what size or sector, every business we work with will always receive the same high standard of advice and service from our team.”

The firm’s history

Richard Frost, Partner at Hawsons, has prepared the following summary of the firm’s history:

George Hawson was four years old when the firm that now bears his name was founded.

At the age of 16 he was teaching at his old school, Ashley House in Worksop and planning a career in the Ministry of the Church of England. However, a serious illness persuaded him that he needed to adopt a less strenuous vocation …. accountancy. He enrolled as a clerk to Alfred Allott who had built up what The Accountant magazine described as “one of the most important practices in the North of England”.

In 1854, over a quarter of a century before the creation of the Institute of Chartered Accountants in England and Wales, at a time when Sheffield had more straw hat makers than accountants, Allott left the employment of The Sheffield and Hallamshire Bank after 13½ years, the directors recording in the bank’s minutes “the high opinion they entertain of his ability, industry and conduct”.

He set up as a public accountant with John Hewett who advertised in The Sheffield Independent in late December 1854:

“Gentlemen – I beg respectfully to inform you that I have taken into partnership Mr Alfred Allott … whose business qualities, urbanity and manners, strict integrity and extensive commercial experience peculiarly qualify him for the position of Public Accountant and Confidential Agent”.

And so, as Hewett and Allott, the firm began in Central Chambers in Sheffield High Street, in December 1854.

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(Above) The Chamber

Over the next 20 years Sheffield grew more rapidly than any other town in the country on the back of its burgeoning steel and engineering industries, fuelled by local coal and serviced by developing railways. And whilst Hewett left to become the first company secretary of John Brown & Co when it incorporated in 1864, the practice continued to develop.

By the early 1870s Alfred Allott was a widely known and respected figure. He was the auditor of the Midland Railway and was a specialist in the financing of railways and collieries; called in to investigate the affairs of the Scottish Caledonian Railway when it ran into trouble. With the introduction of limited liability he promoted many local publicly quoted companies – Midland Iron Company; Truswell’s Brewery; Samuel Fox; Davy Brothers; Joseph Rodgers; William Cooke, Brown Bayley and Dixon; Joseph Peace and Sheffield Forge and Rolling Mills to name but a few.

Elected to the Town Council in 1867 he became one of twelve Alderman in 1873 and was put forward as a local parliamentary candidate for the Liberal party. He sat on the School Board and was prominent in the local Congregational Church providing land and funds for the building of several chapels.

But this highly respected establishment figure, like many of his era, could not resist risk. Besides his accountancy practice, he owned a colliery at Pitsmoor, Renishaw Iron Works at Eckington, the Newbridge Iron Ore Company in Northamptonshire and a mine in Cornwall. And then he borrowed to invest £132,000 – many millions in today’s money – in land in far away Tennessee and Georgia, in the USA. He had hoped to exploit the land for its mineral wealth, but a prolonged worldwide slump followed, and in November 1876 Allott went bust.

This is where George Hawson came in; with Allott resigning from his accountancy practice with his then partners Thomas Hadfield and John Kidner and Hawson appointed partner in his place.

In an age where scandal meant ruin, surprisingly bankruptcy often attracted sympathy, perhaps because it happened to so many around that time, including the Lord Mayor. Within months Allott returned to the partnership and the firm moved to what were described as ‘sumptuous’ premises at Hartshead in 1878, where it was to stay until 1970. He was the first President of the Sheffield Institute of Accountants in 1877 and, three years later, a founder council member of the National Institute. By then he had moved to London, and by 1882, with Thomas Hadfield having set up on his own and John Kidner having moved to Northampton, Hawson was the sole partner remaining.

Mergers in Sheffield, Doncaster and Northampton

Hawson’s son Grafton joined the practice and when George retired in 1919, aged 69, Grafton merged firstly with Edgar Jenkinson and in 1926 with Hubert Nicholson. Subsequent mergers with long established Sheffield firms, A. Leslie Wing & Co. in 1946 and Hubert Smith in 1963 set the foundations for the current Sheffield office. In 1986 the firm moved to Northampton by joining up with Dutton & Co, and in 1990 merged with Harold Moon & Taylor in Doncaster. The latest merger took place just over a year ago with another long established and well known Sheffield firm, Holmes Widlake.

Sheffield office

(Above) The Hawsons Sheffield Office

Doncaster office

(Above) The Hawsons Doncaster Office

HawsonsNorthampton

(Above) The Hawsons Northampton Office

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