Tax Efficient Remuneration

• Examining whether it is best to run the business as a limited company or otherwise (sole trader, partnership or LLP),
• If operated as a limited company:
  • Looking at the combined business and personal tax ‘picture’ and optimising the mix of retained profits, salary, bonus and dividends (for the business owner and, where relevant, immediate family members). In order to direct dividends tax efficiently, it may well be appropriate to create a structure with ‘alphabet’ shares,
  • Where the business occupies premises owned personally, comparing the income tax, capital gains tax and inheritance tax issues of whether or not to charge a rent,
  • Maximising receipt of tax free benefits in kind (either as additional remuneration or via a salary sacrifice scheme),
  • Examining whether it is acceptable and appropriate to receive taxable benefits in kind,
  • Whether it is better for cars to be owned and expensed by the company, by employees personally, or by a separate unincorporated service business,
  • Whether company car tax could be reduced, without unacceptably prejudicing choice, by changing the vehicle to:
    • An electric vehicle,
    • A lower CO2 emission car,
    • A classic car (aged over 15 years old and now worth less than £15,000),
    • A van (including some twin cab pick-ups),
    • A pool vehicle
  • Whether it is cheaper for employees to reimburse the company for the full cost of privately used fuel, or suffer the tax charge on the fuel benefit in kind,

  As well as creating tax efficient remuneration, we are also mindful that there are often other drivers behind this process:

  • Linking financial reward to actual performance, to motivate key individuals,
  • Making sure that the remuneration split assists with, and does not jeopardise:
    •  R&D tax relief claims,
    • Grant funding criteria.

Disclaimer - All information in this post was correct at time of writing.