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December 2021

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To December’s Business Companion News.

Christmas Payroll Deadlines snowman.png
Please email details of your December payroll to by Tuesday 21st December.  We will then return your payslips and reports to you by Thursday 23rd December to allow everyone time to be paid before Christmas. If there are any late changes they will be processed after 28th December.

Wishing you a Happy Christmas and a successful New Year!

Jennifer & Lorraine

December 2021
· How to take money out of your company
· Using the Import One-Stop-Shop for low value sales
· EIS – FTT considers risk to capital condition
· Let property: improvement v repair
· December Questions and Answers
· December Key tax dates
How to take money out of your company
Imagine you want to take more money out of your company.  How do you do this without incurring excessive taxes? There are a variety of taxes that you potentially face, and they are cumulative.  I am assuming a VAT-registered business, paying Corporation Tax (CT), with a payroll paying full National Insurance (NI). 

In the following examples, after each option the figure in square brackets is the money you can take out for each £100 of cost to the employing company.

The top method of recovering money from your company is to reclaim expenses on which VAT can be claimed.
  • VATable Expenses (VAT recovery, CT recovery,  free from personal tax and NI) [£100]
The next obvious methods:
  • Interest on a Director Loan paid to business owners to £1k each (CT recovery, free from personal tax and NI) [£100]
  • Wages to the NI secondary threshold of £8.8k (CT recovery, free from personal tax and NI) [£100]
  • VAT-free Expenses incl refund of home as office. (CT recovery, free from personal tax and NI) [£83/£100]
  • Dividends to less than £2k each shareholder (No CT recovery but free from personal tax and NI) [£81]
Next the partly taxable ones:
  • Wages set between the NI secondary threshold of £8.8k and primary threshold of £9.6k (CT recovery free from personal tax.  Employer NI only) [£86]
  • Interest on a Director loan paid to business owners after the first £1k (CT recovery, personal tax, no NI) [£80]
  • Wages set between the NI primary threshold of £9.6k and the personal allowance of £12.6k (CT recovery free from personal tax.  NI applies to the element beyond £9.6k, both Er and Ee) [£77]
  • Dividends from £2k each shareholder to no more than £37.5k (No CT recovery, but free from personal tax, 7.5% Dividend tax in place of NI) [£75]
More exotic:
  • Employer Pension contributions  (CT recovery free from short term personal tax, no NI, and you don’t get the money until you retire) [£80]
  • P11d benefits (CT recovery.  20% personal tax.  NI applies, Er only) [£66]
I don’t recommend the following:
  • Employee Pension contributions  (CT recovery free of personal tax only in the short term, subject to Employer NI, and you don’t get the money until you retire) [£68]
  • Wages above personal allowance £12.6k (CT recovery.  20% personal tax.  NI applies, 13.8% Er and 12% Ee) [£57]
  • Dividends beyond £37.5k each shareholder (No CT recovery free from personal tax but 32.5% Dividend tax in place of NI) [£55]
  • Wages above basic rate band £50k (CT recovery.  40% personal tax.  NI applies, 13.8% Er and 2% Ee) [£50]
  • Wages above band £100k (CT recovery.  60% personal tax.  NI applies, 13.8% Er and 2% Ee) [£33]
Other tactics include borrowing from your company and splitting income with other family members working in the same business.
Using the Import One-Stop-Shop for low value sales top
EIS – FTT considers risk to capital condition top
The old low value import VAT threshold of €22 was abolished in June 2021. All exports (which now include sales of goods to the EU) are subject to VAT. Where the total value of the shipment doesn’t exceed €150, the seller can opt to charge VAT at the point of sale in order to avoid the customer needing to pay import VAT in their member state, which can lead to delays.
Read More
The enterprise investment scheme (EIS) is a collection of tax incentives aimed at encouraging private investment into younger trading companies. EIS is well established; however, the rules have been subject to various changes and additions over the years.
Read More
Let property: improvement v repair top
The tax rules property for businesses have changed considerably since 2010, for example the restriction of relief for financing costs to the equivalent of a basic rate tax reducer (at best). Almost all these changes have been made with the aim of making property letting less attractive. This makes it all the more important to ensure legitimate deductions are correctly identified and claimed.
Read More
December Questions and Answers top
December Key tax dates top
Q1. I recently made an investment of £100,000 under the Seed EIS scheme. However, as I don’t have much income in the current tax year, I am going to make a carry back claim. I have also read that there is a 50% CGT exemption available. Should I sell some of my listed share portfolio to take advantage of this? Answer

Q2. Our company is selling some fixed assets that are used for the trade. As a result of downscaling, we need to purchase some new equipment. Around half of the sales proceeds will be used to fund this. Is there a way to put off the corporation tax charge on any gain? Answer

Q3. We operate in the hospitality sector. I am preparing our VAT return for the quarter ended 30 November 2021 and am confused about which rate to use, as the temporary rate of 5% changed to 12.5% on 1 October. Should we have applied the new rate as it was changed part way through the quarter? Answer
1 – Due date for payment of Corporation Tax for accounting periods ending 28 February 2021

7 – Electronic VAT return and payment due for quarter ended 31 October 2021

19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/12/2021

30 – Last date to file tax return for 2020/21 if the liability is to be coded out

31 – Corporation tax return deadline for year ended 31/12/2020

Need Help? top
New Clients Welcome top
Please contact us if we can help you with these or any other tax or accounts matters.

In addition, if there’s anyone else who you think would benefit from the newsletter, please forward the email to them or ask them to contact us to be added to the newsletter list.
If you are not already a client and are interested in becoming one, we would love to discuss how we can help and provide you with a competitive quote for our services.

See details of our Business Companion Service.
About Us top
Simple Accounting Limited offers a cost effective Business Companion service to business owners who use MYOB, Acclivity, Mamut, Quickbooks, Freeagent or Xero.

‘All clients using these software packages can benefit from our support. Visit our website for a look at the resource on offer.’

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