Farley And Partners

FINANCIAL PLANNING & STRATEGY GUIDE

Bringing in people from outside your company

Employees

Under the Enterprise Management Incentive scheme (EMI) employees can be granted options for shares in your company. Employee commitment can be rewarded through the growth in value of the shares for which options are held, with the resulting capital gain, potentially, taxable at the lower rate.

EMI and the Share Incentive Plan (SIP) are tax efficient incentives that can be packaged to attract and retain the right people for the future of your company, at a cost the company can afford. Even the potential national insurance contributions liability on the growth in value of SIP shares during the option period can be attached, by consent, to the employee.

Employers can also offer shares free of tax and NIC to new employees. Such employees are termed ‘employee shareholders’, and their contracts of employment reflect a reduction in employment rights such as the loss of redundancy rights and a number of other changes. When the employee disposes of the shares, the capital gain will be tax exempt up to a limited amount.

We welcome the opportunity to discuss an employee share ownership strategy, whether for individual employees or for the entire workforce.

Investors

There are several schemes under which tax reliefs or tax deferrals are available for investment in new and growing businesses:

  • The Enterprise Investment Scheme allows income tax relief (30%) and CGT deferral, plus a tax exemption for any increase in the value of the investment after an initial three-year retention period
  • The seed enterprise investment scheme (SEIS) offers income tax reliefs of 50% provided the investment is in a qualifying company and the shares are held for three years from the date of issue. Venture capital trusts offer income tax reliefs (30%) and the opportunity to pool investment with others looking to invest in qualifying companies
  • Social Investment tax relief (SITR) offers income tax relief of 30% to investors in qualifying social enterprises, plus a CGT deferral and tax exemption on the investment provided held for at least 3 years. SITR is also available to those providing loan capital to qualifying enterprises.

The rules and tax breaks for each scheme are different, and do tend to change from time to time, but please discuss the options with us if you are thinking of attracting outside investors. SEIS is for those willing to invest in very young companies.

The tax exemption for trading companies and groups on the sale of shareholdings of 10% or more in trading companies may also encourage corporate investors. If you are aiming to bring new investment into your company, you will need to have a very clear idea of why the investors should choose your company, and what they can expect to get out of it. You will need to have a comprehensive business plan, with supporting financial forecasts to put before potential investors or lenders.

Investment & Related Laws

The Gambia Investment & Export Promotion Agency Act 2010 and Regulations 2012 are the main law governing investment in The Gambia. The Act and Regulation provide guidance on investing in The Gambia and clearly indicate the priority sectors for the country, guarantees to investors, investment incentives eligibility criteria, procedures, the institutional framework and answers to questions that investors usually consider in making an investment decision.

Below are other laws and regulations that impact on businesses in The Gambia:

·       Environment Act 1994

·       Value Added Tax Act 2012

·       Business Registration Act 2004

·       National Environment Management Act – NEMA 1994

·       Hazardous Chemicals and Pesticide Control and Management Act 1994

·       EIA Guidelines

·       Environment Quality Standards Approved

Business plan

You should prepare a business plan that will address such planning matters as: the source of your business capital, including your start-up requirements as well as your working capital funding (tax -efficiency is an important factor here), whether the business needs a PAYE scheme, whether it should be VAT registered and, not least, the business structure that will best meet your needs – sole trader/sole practitioner, partnership, limited liability partnership or limited company. Most people use SatNav to aid navigation – in fact many would suggest that this is the most important car accessory. Likewise, a business plan is an aid to help you navigate the direction of the business. We can help you through the planning and decision making process – and with the appropriate registrations.

Business structure

There are both advantages and disadvantages for each trading structure with respect to control, perception, support, and costs. There are also some things to avoid. For example, if you decide that incorporating your business is the preferred solution there may be important issues to consider before you proceed. Also, you may wish to discuss with us where the ownership of any freehold property should be vested – should property be owned by a company or personally by the owners?

The choice of business structure can also be relevant in how you extract the money from the company. A limited company is a useful tax shelter, but only until you take the money out for personal use. There are different ways of doing this – salaries, dividends, loans, rent, for example. We can discuss your options and implications of each of these with you and help you determine which is most suitable.

Capital allowances

‘Capital allowances’ is the term used to describe the deduction we are able to claim on your behalf for expenditure on business equipment, in lieu of depreciation.

For expenditure on business equipment, including vans and fixtures in buildings, but not cars, you may claim a full 100% deduction of up to D500,000 against your profits. If your accounting period is less than 12 months long, or spans the cessation or commencement date, the D500,000 limit is scaled down proportionately. Where you have an accounting period of longer than 12 months, the period must be split and the allowance considered separately for each period.

If your business is a new economic activity located in an Enterprise Zone your business is entitled to a 100% deduction on all expenditure qualifying as referred to above but with further conditions.

The allowance is available for each enterprise if you run more than one, provided these businesses are not controlled by the same person and either occupy the same premises or carry on the same business activities.

A 100% first year allowance is available for investment in designated energy saving plant and machinery, plant and machinery to reduce water use and improve water quality, and for new unused cars with official emissions limits.

Otherwise, most plant and machinery qualifies for an allowance on a reducing balance basis. There is at a lower rate for long-life assets, fixtures integral to buildings, high emission cars and thermal insulation.

There are no capital allowances available on the purchase or construction of buildings however many items that may seem to be part of a building may actually be regarded as plant or as features integral to a building, and may therefore qualify for a capital allowance deduction.

As capital allowances are based on qualifying expenditure in the accounting year, you might consider buying plant and machinery before the end of the year, rather than just after, in order to obtain an earlier deduction.

If you rent out fully furnished residential property, you may be able to claim a wear and tear allowance to offset the costs of the furnishings you provide. Residential rental businesses cannot claim capital allowances for equipment and furniture in the houses they let.

Employed or self-employed

When you take someone on in your business, you will need to determine whether they are an employee, or self-employed. This is a complex area, because there is no statutory definition of ’employment’ or ‘self-employment’. The consequences of making an incorrect decision can be very serious indeed. You may be liable for not only the employer national insurance contributions (NICs), but also the amounts of tax and NICs that would normally be borne by the employee if you incorrectly treat someone as self-employed.

In particular, it is not possible for an employer and employee to agree that someone is not an employee. If the work has the nature of employment, that is how it should be taxed.

Because large amounts of tax and national insurance contributions can be at stake, GRA can take a firm line, so obtaining advice specific to your business is essential. However, you need to seek advice before you engage workers, so that we can advise on the best strategy and engagement terms to suit your business circumstances.

Getting started

If you are thinking of starting a business, you should consider, among other factors: the nature of the business, the demand for the service or product, the state of the economy, the availability of suitable funding, your break-even, the profit potential, the rate at which you expect the business to grow, the impact of being the business owner on all areas of your life and the degree of risk involved.

GRA registration

Advising GRA when you become self-employed, and probably liable national insurance contributions (or alternatively you will need to establish if you qualify for exception), may not be very high on your list of priorities in the first weeks and months of a new business – but failure to notify that you are in business can attract a penalty. You may not even be sure about the date that your business started! If you have any doubts, we can advise you.

Involving the family

You can employ family members in your business, provided the salary and other benefits you pay them is commercially justifiable. You can remunerate family members with a salary, and perhaps also with benefits – such as a company car or van. However, before buying a vehicle through the business you should discuss this with us as it is possible to incur a personal tax charge on a car  including the use of fuel for private purposes – the tax cost of cars can be even greater. Other options include medical insurance or making payments into a registered pension scheme.

You can also take family members into partnership, thereby gaining more flexibility in profit allocation. In fact, taking your children into partnership and gradually reducing your own involvement can be a very tax efficient way of passing on the family business. Be aware, though, that taking family members into your business may put the family wealth at risk if, for example, the business were to fail. GRA may challenge excessive remuneration packages or profit shares for family members, so seek our advice before you make any decisions.

If you operate your business through a limited company, under current tax law you can pass shares onto other family members and thus gradually transfer the business with no immediate tax liability in most cases. However, a tax saving for the donor usually impacts on the recipient and you also need to steer clear of the anti avoidance rules, so again, seek our advice first.

Make the most of your expenses

Our role as accountants and business advisers is to work with you to help you maximise your profitability and look at the various available options to help you minimise your taxes – we know that you do not want to pay a penny more than is absolutely required.

You will pay tax on your taxable profits (which will differ from the profit shown in your accounts), so it is essential to claim all business related expenses. You can claim a proportion of your household running costs and a proportion of your home telephone bills if you maintain an office at home. You can also claim for the cost of travel and accommodation when you are working away from your main place of business.

You must keep adequate business records – including a log of business journeys – because in addition to ensuring your accounts are accurate, these records may be requested by GRA. Have you considered using a good computer package for record keeping? Cloud accounting is becoming increasingly popular while Sage, Quickbooks, Xero are proving good solutions with some companies. If you are considering a computerised solution, please ask for our advice. You must keep your business records for six years. Make sure that they are kept safely and not exposed to damp. It is important to ensure that computer records are properly backed up.

Owner-director – increase your net income

There are many matters to be considered when deciding whether directors should be paid by dividend or salary/bonus. In practice, a combination of each is usually an appropriate course.

Remember that dividends are usually payable to all shareholders. If you have outside shareholders who are not involved in the day to day running of the company then you will need to consider your dividend strategy carefully. Although it is possible for shareholders to waive their entitlement to dividends, this can result in tax complications, so a better option may be to have different classes of share, on which different rates of dividend can be paid. However, if this technique is used as part of a scheme to avoid tax or NICs for employees, it may not be effective and thus result in an even higher tax liability.

Finally, you may need to consider with us the effect that regular payment of dividends will have on the valuation of shares in your company.

Paying the tax

For the self-employed, the timetable of tax payments is relatively simple:

  • Please see our tax rates and allowances section

The payments on account are made based on the previous year’s tax liability, and are your ‘down payments’ towards the current year tax bill.

Reducing national insurance costs

Although leaving profits in the company can be tax-efficient, you need money to live on, so you should consider the best ways to extract profits from your company. A salary will meet most of your needs, but do not overlook the use of benefits-in-kind, which may save income tax and could also result in a lower national insurance bill. The total tax and national insurance can be as much as 40%.

Six strategies to save NICs

  • Increasing the amount the employer contributes to company pension schemes
  • Share incentive plans (shares bought out of pre-tax and pre-NIC income)
  • For companies, disincorporation and instead operating as a sole trader or partnership
  • Instead of more salary, paying a significant one-off bonus to reduce employee contributions (this will not work for directors)
  • Paying dividends instead of bonuses to owner-directors
  • Provision of free childcare or childcare vouchers.

Reducing your payments on account

Payments on account are normally equal to 50% of the previous year’s net liability. A claim can be made to reduce your payments on account, if you expect your tax liability to fall from one year to another, although interest will be charged if your actual liability is higher than you expected.

Please do not wait until it’s too late – keep us informed of any factors which might change your tax liability. We can only suggest business solutions if you tell us in good time about issues facing your business.

There is also a system of interest and surcharges to encourage prompt payment.

Research and development

Tax relief is available on qualifying research and development (R&D) expenditure at varying rates. These reliefs are for more than the amount spent and so represent a form of government grant. The relief is particularly generous for smaller businesses.

However, the relief is only available to businesses which operate as limited companies. This may be a critical issue to consider at the commencement of your business.

SMEs barred from claiming SME R&D tax credit by virtue of receiving some other form of state aid (usually a grant) for the same project may claim the large company R&D tax credit. This means they will qualify for relief at a higher rate on their expenditure.

If your company exploits a patent, you may be able to benefit from the ‘patent box’. This is an arrangement that reduces the effective rate of corporation tax of the income from exploiting the patent.

Tax and the limited company

If the limitation of liability is an important consideration, then a limited company may be the right solution – but do bear in mind that banks and other creditors often require personal guarantees from directors for company borrowings, so the owners or directors of the business may in fact bear the liabilities of the business out of their personal assets.

Trading through a limited company can be an effective way of sheltering profits as the rates of corporation tax on profits are generally lower than those applying to unincorporated businesses which can be 40% (including national insurance contributions) or more. Although profits paid out in the form of salaries, bonuses, or dividends will normally be taxable at top rates (with quite punitive amount of national insurance contributions in addition), profits retained in the company are taxed at a lower rate – see our tax rates and allowances section for a breakdown of the tax rates..

Retained profits can be used to buy equipment or to provide for pensions – both of which should be eligible for tax relief.

Tax and the unincorporated business

Business profits are charged to income tax and class 4 national insurance contributions on the current year basis. This means that the profits taxed for each tax year are those earned in the accounting period ending in the tax year.

There are special rules which determine the amount of profits taxed for the beginning and final years of a business, and for those joining and leaving partnerships.

There are an increased number of penalties for not complying with the rules and regulations of government departments. We have already mentioned GRA ‘late registration’ penalty, covering late registration for income tax and Social Security Contributions, but other areas to avoid are:

  • Late VAT registration
  • Late filing penalties
  • Late payment penalties and interest
  • Penalties for errors in returns
  • Penalties for failing to operate.

Although we will seek to help you steer clear of them, we need you to play your part by letting us have all the details for your accounts and tax returns in good time, and by telling us of all changes in your business, financial and personal circumstances.

Modernisation of the penalty rules means that many taxpayers could be liable to substantial penalties for understatements on their tax returns. Even if you make an honest mistake, GRA may argue that you have been careless. You will need to be absolutely sure that you tell us everything that may be relevant to your tax liability for a year.

The importance of the accounting date for your business

It is also important to choose the right accounting date for your business. Is there a time of year when it is more convenient to close off your accounting records, ready for the preparation of your financial statement? What would be the best time of year for stocktaking? To what extent is your business seasonal?

From a tax viewpoint, the choice of a year-end early in the tax year for an unincorporated business usually means that an increase in profits is more slowly reflected in an increased tax bill. This can, however, backfire when profits reduce, as the reduction in tax is similarly delayed, and can leave you with a large tax liability when you retire or scale down your business.

Because of the rules about how profits are taxed in the early years of a business, some profits may be taxed twice at start up. A record of this is kept (called overlap profits), and the amount is deducted when the business ceases or changes accounting date, although if profits have fallen sharply, the benefit of this may be limited. In cases where businesses see a significant permanent fall in profitability, it is often wise to change accounting date to 5 April to benefit from the overlap profits sooner.

Unpaid bills and unbilled work

It is a feature of the tax system that businesses must include in their turnover for the year a value for incomplete work, work you have completed and billed, but not yet been paid for, and work completed but not yet billed, all as at the end of the year.

Service businesses are also required to have accounting records that enable them to bring into account the sales value of incomplete contracts at the end of the year. This is an aspect of your business that requires careful planning so do please discuss this with us.

For unpaid bills, you may be able to claim relief for an identified bad debt, but you cannot claim relief for a general provision based on expectations of how many customers will not pay. Claiming bad debt relief does not stop you trying to obtain payment. Smaller businesses may account for VAT on a cash balance and may soon be able to do so for income tax also. These cash accounting systems provide bad debt relief at source.

Smaller businesses (but not companies) are permitted to account for their business profits on a cash basis, which essentially means that income and expenses are accounted for only as they are paid. The business must have income of less than the VAT threshold at the end of the tax year and not be subject to one of the exclusions. Accounting on a cash basis can make life simpler for a new business starting out, but the profit figures produced can be more subject to significant fluctuations and therefore may prove of limited use in securing, for example, a bank loan or a mortgage.

Year-round business planning

Tax and financial planning should not be left until the end of the tax or financial year, but in advance of the end of your business year, why not talk to us about:

  • The impact on your tax position and financial results of accelerating revenue and capital expenditure into the current financial year, or deferring it into the next
  • Reviewing your pension arrangements and maybe paying additional pension contributions
  • How you might take profits from your business at the lowest tax cost, and how timing of payment of dividends and bonuses can reduce or defer tax
  • Avoiding overvaluing stock and work in progress
  • Improved cash collection strategies
  • Improvements to your billing systems and record keeping, or a general systems review to improve profitability and cash flow
  • Tax saving employee remuneration packages with potential cost savings for you and your employees.

Do contact us if you would like further help or advice on this subject.

Tax planning is the legal process of arranging your affairs to minimise a tax liability. There is a wide range of reliefs and provisions that are available to legitimately reduce a tax liability without straying into the rather more challenging area known as tax avoidance.

Examples range from simply choosing a year-end date early in the tax year to maximise the period from earning profit to paying tax, to arrangements to shelter an appreciating asset from inheritance tax.

Tax evasion is different, it is illegally reducing your tax, such as falsifying figures or not disclosing income. This carries serious penalties which can include a criminal prosecution.

A problem arises when the law is unclear, so it is not obvious whether a tax planning scheme is within the law or not. For this reason, there have been three significant developments.

1. We have seen an ongoing approach to artificial tax avoidance which stands between avoidance and evasion. This was probably most accurately defined by one professional who said that: “Artificial avoidance schemes are those where they create economic distortions, provide commercial advantages over compliant taxpayers, redistribute tax revenues in an unfair or arbitrary manner, or represent an abuse that conflicts with or defeats the will of Parliament”.

These must be disclosed and are closely examined to see if they are legal. Even if they are, it is likely they will be closed in the next Finance Act, sometimes with retrospective effect.

2. A list of ‘hallmarks’ of tax avoidance schemes has been published. If any of the following are found in a scheme, it is likely to be challenged as artificial tax avoidance:

  • It sounds too good to be true
  • Artificial or contrived arrangements are involved
  • It seems very complex for what you want to do
  • There are guaranteed returns for apparently no risk
  • There are secrecy or confidentiality agreements
  • Upfront fees are payable or the arrangement is on a no win/no fee basis
  • The scheme is said to be verified by a top lawyer or accountant but no details of their opinion(s) are provided
  • The scheme is said to be approved by GRA (it does not follow that this is true)
  • Tax benefits are disproportionate to the commercial activity
  • Offshore companies or trusts are involved for no sound commercial reason
  • A tax haven or banking secrecy country is involved without any sound commercial reason
  • Tax exempt entities, such as pension funds, are involved inappropriately
  • It contains exit arrangements designed to sidestep tax consequences
  • It involves money going in a circle back to where it started
  • Low risk loans to be paid off by future earnings are involved
  • The scheme promoter lends the funding needed.

3. There is a General Anti Abuse Rule (GAAR) which enables GRA to take action to counter any abusive avoidance activities without making specific legislation to close the schemes down individually. Where GRA wish to challenge an arrangement under the GAAR, the detail will be considered by a GAAR panel of tax professionals to advise whether the arrangements are abusive or not.

Please ensure that you seek our advice with regard to all aspects of tax planning.

Many people can go for years paying too much (or, perhaps more worryingly, too little) tax. PAYE aims to collect, over the course of a tax year, approximately the right amount of tax from your earnings.

Cheap or interest-free loans

Where loans from an employer total more than D5,000 for example at any time in the year, tax is chargeable on the difference between any interest actually paid and interest calculated at the ‘official’ rate (currently 12%).

Your remuneration package

An attractive remuneration package can include any of the following:

  • Salary
  • Reimbursement of expenses
  • More generous expenses – business travel in first or business class, or a better quality hotel on business trips
  • Bonus or profit related award schemes
  • Share incentive arrangements
  • Pension provision
  • Childcare
  • Life assurance and/or healthcare
  • Choice of a company car or additional salary and reimbursement of car expenses for business travel in your own car
  • Mobile phone
  • Contributions to the additional costs of working at home
  • Other benefits in kind including, for example, annual parties costing not more than D150 per head for the year, or long service awards 

Of course, negotiating the appropriate package is a matter for you and your employer, but you should seek our advice to ensure that your overall package is as tax and NI efficient as possible.

Expense payments

Your employer is required to report expenses payments to GRA each year. To avoid paying tax on these payments you have to claim a deduction on your Tax Return – your employer will provide you with a copy of your P11D.

This cumbersome process of reporting and then claiming expenses paid may be avoided if your employer has been granted a dispensation. Expense payments covered by the dispensation do not have to be reported to GRA and they do not have to be included, with a counter-claim, on your own Tax Return. Payments covered by dispensations will be subject to review from time to time, including in the course of a GRA inspection visit.

You may be able to claim tax relief for other expenses you incur in connection with your job, but the rules are very restrictive, and you may not always be able to claim for expenses you regard as reasonable work related expenditure.

Pensions

Employer contributions to your pension scheme or your own personal pension policies are not liable for tax or NICs. The employee’s contribution attracts tax relief but not relief from Social Security.

You should be aware that while your employer can contribute to your personal pension scheme, these contributions are added to your own for the purpose of measuring your year’s pension input against the annual allowance. Extra relief may be available dependent on your level of contributions during the last three tax years. Please ask us or your normal pension adviser for advice.

Performance related pay

Although there are no tax breaks, performance related pay and bonus schemes are incentives to many to work harder and enjoy some of the benefits of the employer’s increase in profits. There can, on the other hand, be a national insurance saving for employees (not directors) if performance related pay is not included in the weekly or monthly pay, but instead paid as a one off bonus.

Travel and subsistence

The rules which allow tax relief for travelling and subsistence expenses are quite complex, and subtle differences in your working arrangements can change the amounts which you are able to claim, or can be paid tax free. 

You will not normally be able to claim for the cost of travelling to your normal place of work, but if you have more than one place of work, sometimes travelling expenses are tax deductible when travelling to a temporary place of work for up to 24 months.

Site-based employees are able to claim a deduction for travel to and from the site at which they are working, plus subsistence costs when they stay at or near the site subject to meeting certain conditions.

Because the tax impact on your travelling expenses can be quite significant, you should ask for help if you are considering a change involving a long travel to work.

If an employee works from home, he or she may be paid an expense allowance by the employer without having to produce evidence of expenses.

If travelling on work, personal incidental expenses may be paid tax-free up to a limited amount a day in The Gambia or a different amount a day overseas. 

This is designed to cover personal expenses incurred while away from home such as newspapers and laundry that may not otherwise be allowable. Employees must not charge the expenses on their hotel bills in addition to the fixed rate allowance.

Arranging a Will

How would your spouse and children manage if you died or were incapacitated tomorrow?

Beyond taking the obvious step of ensuring you have adequate insurance cover, with life assurance written into trust for your spouse or children to ensure quick access to funds, you need to make a Will. Despite repeated campaigns, it is believed that three-quarters of adults still do not have an up-to-date Will. If you die without a Will, the law determines who receives your estate.

We would also strongly recommend that you:

  • Make a living Will – so you can make clear your wishes in the event that, for example, you are pronounced clinically dead following an accident, and;
  • Execute a lasting power of attorney – so that if, whether as a result of an accident or illness, you become incapable of managing your affairs, you can be reassured that responsibility will pass to someone you choose and trust.

Of course all this also applies for your spouse, and to those who are in civil partnerships. You should also consider the possibility that both parents may be simultaneously killed or incapacitated.

Create opportunities to save tax

We can help you to create opportunities to reduce your marginal tax rates by careful identification of appropriate strategies.

SituationPossible strategyPossible result
Income from assets taxed at 40%/45%Transfer to spouse if he/she pays tax at lower rates Transfer into joint namesTax @ 40%/45% reduced to 20% or less Half of income taxed at 20% or less
Proposed sale will give sizeable capital gainTransfer to spouse if he/she can use his/her annual CGT exemption or spouse has unused CGT losses Transfer into joint names defer sale of 50% until after the end of the tax yearAdditional D11,100 (maximum) of gain tax free Cover part or all of gain with losses Double exemptions and deferring some tax by 12 months
One spouse rich in assets – wish to make gifts within CGT and IHT limitsTransfer to the other spouse, who can then make gifts in parallelDouble exemptions

Gifts must be outright to be effective for tax, and must not comprise a right only to income.

Transfers on or within say seven years of death to a spouse domiciled outside The Gambia may be exempt only to a certain extent.

Planning strategies

1. A debt free start for your children

For younger children, ongoing payments into a Junior ISA may create the opportunity for parents, grandparents and other family members to build a fund to help offset university expenses and minimise debt at the start of your child’s working life.

Remember that all children have their own personal allowances meaning that their income up to that personal allowance escapes tax this year provided the capital does not originate from parental gifts. If income arising on parental gifts exceeds say D100, the parent is taxed on it unless the child has reached 18, or is married. Thus parental gifts in excess of the required limit should perhaps be invested in something which produces tax-free income, or which accumulate income, or in a Junior ISA. The D100 limit on income does not apply to income on gifts into a Children’s Savings Account.

2. National Savings Children’s Bond

Income from capital gifted by grandparents or other relatives is taxed as the child’s, as will income distributions from a trust funded by such capital.

Contact us if you are not sure which course to take.

In particular, the potential tax burden on the disposal of the former marital home as a result of separation and divorce can be significant, and may be something about which you need specific advice.

Tips to consider when writing a Will

  • A Will should be reviewed regularly. Beneficiaries may die; new beneficiaries may have been born. Your wishes and values may have changed.
  • Remember that marriage usually revokes any Will you have made. Divorce usually excludes your former partner as a beneficiary. These are occasions when you may wish to consider updating your Will.
  • On a practical note, tell your spouse, your parents, and your business partners where your Will and any related documents are kept – it is still up to you whether or not you tell them what the documents contain, but if you are passing responsibility for managing your affairs on to others, it would be advisable to talk matters through with them now.

It is also advisable to tell your family members whenever you change your Will. Should you tell them what assets you have and how they can be located?

What are your planning objectives?

Key financial planning goals include:

  • Making the most of your tax-free allowances
  • Keeping your marginal tax rates as low as possible
  • Maintaining a spread between your income and capital

Remember that all tax planning must:

  • Save tax overall. Do not, for example, save stamp duty land tax at 3% only to pay more capital gains tax at 28%
  • Not cost more than the tax you will save
  • Be flexible enough to cope if tax law changes, and
  • Not impose conditions or restrictions that you find unacceptable.

Most people recognise that their retirement plans do not look as healthy as they did a decade ago. Stock Market collapses have destroyed most people’s compounding calculations while low interest rates are reflected in low annuity rates which continue to be adjusted downward to reflect higher life expectancy. Against this background, how do you plan to have a ‘comfortable’ financial retirement?

Case study

Sainey will earn D55,000 in 2017/18. He will invest D12,500 into his personal pension policy. He has no other income and claims only the standard personal allowance. 

Sainey will write out a cheque to his pension provider of the premium, net of basic rate tax relief, D18,000. Sainey is also entitled to higher rate tax relief on the gross premium, amounting to D2,500. As Sainey is an employee, we can ask GRA to give the relief through Sainey’s PAYE. Otherwise, we would claim relief in Sainey’s 2018 Tax Return.

Thus the net cost to Sainey of a D12,500 contribution to his pension policy is just D7,500.

You will normally have selected one fund, or a spread of funds, for your pension savings. Would a switch give you more security or the scope for more growth?

Premiums on personal pension policies and stakeholder pensions are payable net of basic rate tax relief at source, with any appropriate higher rate relief usually being claimed via the Tax Return.

SIPPs

In response to poor performances from pension fund managers, some retirement savers have switched their pension savings into Self Invested Personal Pension schemes (SIPPs) – a form of personal pension plan which gives the investor much more influence over how the funds are invested. This will be very good for those looking for an additional pension apart from the standard Social Security Contributions.

Company pensions

There are two kinds of company pension scheme, into which you and your employer may make contributions. A final salary scheme (Social Security) pays a retirement income related to the amount you contributed when you stop work, while a money purchase scheme instead reflects the amount invested and the underlying investment fund performance. In both cases, you will have access to tax free cash as well as to the actual pension. 

The impact of stock market downturns has taken its toll on pension funds. Losing the effect of the compounding of investment growth – coupled with much lower annuity rates – has resulted in many schemes losing value and as a consequence being underfunded. 

As a consequence where companies now provide company pensions these are now almost entirely based on ‘money purchase’ arrangements, under which no guarantee of the eventual pension available is made. 

Those already in company pension schemes should be aware that the rate at which contributions can be made by the member is now limited and total relevant earnings, subject to scheme rules. Where your employer contributes on your behalf there is no earnings related limit, and only the annual limit applies.

Personal pensions

Investment in personal pensions is limited and the amount of your relevant earnings, but subject to the annual allowance and any unused allowance from the previous three years in all years except the year in which you retire.

Planning strategy

As well as your age, your retirement planning strategy will be determined by a number of factors:

Is there a company pension scheme?

  • Are you self-employed?
  • How old are you?
  • How much can you invest for retirement?
  • How much state pension will you receive? 

For a forecast of your state pension, phone Social Security.

You can estimate your post-retirement living expenses at roughly 60-80% of your current living expenses. Studies have shown that, comparing people aged 45-54 and those aged 65 or more, the average reduction in expenses is:

Personal care, light and food35%
Housing and furnishings39%
Entertainment50%
Clothing56%
Insurance85%
Education88%

While the above table represents an average some other questions may assist in helping you calculate what income you might need in retirement.

  • Will your car costs now be payable by you personally instead of by the business?
  • What additional personal costs will you incur? e.g. holidays
  • Will your hobbies cost you money, or maybe earn some income for you?
  • What family costs might you still incur? e.g. weddings, house deposits, grandchildren
  • Will you continue to save?

Private pensions

If you are not in a company scheme, you should make your own arrangements, since relying on the state pension is already unrealistic, and will become more so with each passing year.

Retirement annuities

Available only where a policy currently exists.

Start now

Although it’s never too late to plan for your retirement, the earlier you start, the more chance you will have to accumulate the funds you will need.

In the current climate, whether you choose to focus on pension savings, alternative savings products, or a combination of both, your savings will need time to grow.

To create a retirement fund of about D225,000 over 25 years, you would have to save about D7,000 every year, assuming approximately 2% growth. Saved in an ISA, the cost over 25 years would be D175,000, compared with D105,000 if you obtained 40% tax relief on your pension policy premiums. 

On the other hand, at retirement, the pension policy would provide a tax free lump sum and an income, while the funds in savings would be available to draw, free of tax, immediately (or they can be drawn before retirement, subject to plan rules). 

Partly influenced by poor returns from pension policies and adverse publicity regarding pension companies coupled with lower annuity rates, many people are now spreading their savings between company or personal pension schemes and other forms of investment.

Do contact us if you would like further help or advice on this subject. 

Will the state pension suffice?

Even if it is not currently top of your agenda, being able to retire when and how you would like, is sooner or later likely to be one of your most important financial objectives. But achieving this goal takes planning and perseverance. 

Unless you are in the fortunate position of having a final-salary pension scheme which is not underfunded you will almost certainly need to augment your state pension. You could spend a third of your life in retirement. Will you find those years the golden times we all dream of, or a constant struggle to pay the bills?

Your state pension is worth about D6,030 at current rates, assuming you have a full Social Security record. For those reaching state pension age, this requires about 30 years’ contributions. If you have not yet retired, we can help you check your record and see if any gaps can be filled. 

A review of your state pension entitlement will also indicate what you may expect to receive. 

The state pension age (SPA) is also changing and it is far from clear that we have the final definitive position. 

The Government has announced that the state pension will in future increase by the highest of price inflation and earnings inflation.

According to government estimates, the gap between how much people are saving and how much they need to save to ensure a comfortable retirement is over £60 billion. It believes that 13 million people – nearly half the working population – are not saving enough for their retirement. 

Your home as a source of finance?

Although they might not be suitable for everyone, there are at least two ways to use your home to boost your retirement finances. First is down-sizing – selling your current home and buying something cheaper to release value now tied up in your property for other purposes. If you wish to continue living in the same property, ‘equity release’ might be something to consider. There is more than one form of equity release. Equity release will not suit all families, and you need to discuss all of the implications with us and your other financial advisers.

Contrary to popular belief, Lorem Ipsum is not simply random text. It has roots in a piece of classical Latin literature from 45 BC, making it over 2000 years old. Richard McClintock, a Latin professor at Hampden-Sydney

Business factors

External factors can also be important in timing your sale. If you can time your business sale to coincide with a period of economic growth, when buyers outnumber sellers and will pay premium prices, you will most likely secure the best price. Although the current economic climate is fairly flat there are a considerable number of companies looking to buy as well as hedge funds looking to build a portfolio of business groups.

The following questions may assist in assessing the climate for selling the business:

  • What is the effect of the current state of the economy?
  • To what extent is your business ‘trendy’ or at the leading edge?
  • Is your business forecasting increases to the top and bottom lines?
  • Is your business doing better than other similar businesses?
  • Is your business at, or near, its full potential?
  • Are there prospective purchasers?

CGT basics

As a basic principle, CGT is charged on the difference between what you paid for an asset and what you receive when you sell it, reduced by such amount of your annual CGT exemption as has not been set against other gains. However, CGT is one of the most complex taxes we have, so there may be a number of other factors affecting the final tax payable on a disposal.

CGT reliefs may be very valuable

Entrepreneurs’ relief applies to the sale of a business and can reduce the rate of tax you pay. It is essential if you want to maximise your net proceeds that you consult with us about the timing of a sale, and the CGT reliefs and exemptions which you might be entitled to claim.

EIS and similar investments

A gain on any disposal can be deferred by investing in shares under the EIS scheme. Similar relief is available to investors in shares under Seed EIS (50% maximum) and to those investing in or lending to qualifying social enterprises under SITR. This delays the tax due on the original disposal, but does not eliminate it.

However, the CGT treatment of gains on EIS shares themselves is very advantageous, and this might be an area worth considering.

Eliminate CGT altogether?

CGT may not be chargeable if you are not resident in The Gambia. However, you should seek advice from us before seeking to avoid CGT by leaving The Gambia. In particular non-residents are chargeable to capital gains tax on gains arising on Gambia residential property.

No CGT is payable for businesses or other assets that pass on your death. They may be subject to inheritance tax instead, where they may qualify for generous business property relief.

Entrepreneurs’ relief

This generous relief applies to sales of a whole business or part of a business. This relief does not apply to the disposal of assets. There are specific circumstances under which the relief can apply to such a disposal, but these are related to the disposal of the business in which the asset is used.

Entrepreneurs’ relief is a lifetime limit for a reduced rate of CGT. As this is a lifetime limit each disposal uses up relief which would otherwise be available for subsequent disposals. The types of disposal which attract relief are:

  • The sale by a sole trader of his or her business as a going concern (including incorporating it)
  • The sale of chargeable assets which were used by a sole trader in his or her business, which has ceased trading within the last three years
  • The disposal by a partner in a partnership of his share in the firm, or of part of his or her share, and
  • The disposal of shares and securities in a company, to which further conditions apply.

Where the business disposed of is run through a company, the disposer must own at least 5% of the ordinary share capital of the company which must entitle him or her to 5% of the votes; he or she must be an officer or employee of the company, and the company must be carrying on trading activities, and to no substantial extent any other activities.

This requirement about the company’s activities, is the same test as previously applied under taper relief, so if your company qualified for business asset taper relief, it also qualifies under the new rules. There is also relief available on the proceeds of winding up or dissolving a former trading company, provided this is done within three years of ceasing trading activities.

EMI shares attract entrepreneurs’ relief even where the owner has less than 5% of the shares in the company, and the period of time when the EMI shares were held as options counts towards the ownership period on sale, so that EMI shareholders can usually benefit from the relief as soon as they convert the options into shares, provided they are held for 12 months as options.

Holdover relief

This relief generally applies to gifts of business assets and will normally reduce the tax payable to zero. It works by treating the donor’s gain as if it were attached to the asset – effectively passing on the donor’s gain to be added to any gain realised later by the recipient of the gift. Holdover relief must be specifically claimed by both the donor and the recipient of the asset.

Inheritance tax and your business

Lifetime transfers

For the business owner, the vital elements in the IHT regime are the reliefs on business and agricultural property of up to 100% of the value, which continue to afford exemption on the transfer of qualifying property, or a qualifying shareholding. Ask us to check whether your assets come within this exemption.

Transfers on your death

Do not overlook your business when you draw up your Will. Reliefs may mean that there is little or no IHT to pay on your death, but your Will is your route to directing the value of your business to your chosen heir(s) unless the disposition of your business interest on your death is covered by your partnership or shareholders’ agreement.

Do contact us if you would like further help or advice on this subject.

Maximising profitability

Increasing profitability is always important but no more so than in the years leading up to the sale. So, what is the range of values for your business? Although you may think you can make an educated guess, a professional valuation gives you more solid ground. Assess your position today and then work with us to see how you can make your business more valuable. These are the sorts of questions a potential purchaser might ask:

  • Are sales flat, growing only at the rate of inflation, or exceeding it?
  • Is yours a service business with limited fixed assets, or are stock and equipment a large part of your company’s value?
  • To what extent does your business depend on the health of other industries or of the economy?
  • What is the outlook for your line of business as a whole?
  • Will your company’s products and processes be outmoded in the near future?
  • Does your company use up-to-date technology and have a well-developed research and development programme?
  • How competitive is the market for your company’s goods or services?
  • Does your company have to contend with extensive regulation?
  • Are your company’s products and services diversified?
  • What are your competitors doing that you should be doing, or could do better?
  • How strong is the company’s staff that would remain after your sale?
  • How does your company ‘fit’ with the purchasers?

Maximising the value of your business

Whoever buys your business will want to be clear about the underlying profitability trends – is your profitability on the increase or decrease? Up-to-date management accounts and forecasts for the next 12 months will be close to the top of the list of the information which you should be prepared to make available to prospective purchasers.

The value attributable to many businesses is driven by the historical profits and therefore a rising trend in profitability should result in an increase in the business’ value.

Minimising the capital gains tax

Taxes are one of the necessary realities of the business person’s life. When you finalise the sales agreement and take the proceeds from the sale of your business, you should be completing one of the last steps in a strategy aimed at maximising the net return by minimising the capital gains tax (CGT) on sale.

Personal factors

There are many personal factors that are likely to influence your decision with regard to when to sell your business. You may need to think about:

  • Have your life goals changed?
  • When do you want to retire?
  • If you are selling within the family, when will you sell and how will this transfer/sale be funded?
  • Has your health begun to deteriorate?
  • Do you still relish the challenges of running your business?
  • Does your business have an heir apparent?
  • Will your income stream meet your needs?

Rollover relief

This relief applies to the replacement of business assets, and is intended to allow the seller to reinvest all the proceeds of the disposal in a replacement asset, which he would not be able to do if he had to pay a tax liability. It normally operates by reducing the cost of any new asset by some or all of the gain realised on the disposal of the old asset.

The sale of your business

If you consider your business to have a market value, or if you are looking to your business to provide you with a lump sum on sale, it is essential to start planning now how you will realise that value. This is particularly important if you envisage selling your business within the next 10 years.

Selling your business represents a major personal decision and it is essential to plan how you will maximise the net proceeds from its sale. When might you sell? Who are the prospective purchasers? What are the opportunities you have to reduce the tax due on the sale? Let us help you maximise the potential from your ‘ultimate sale’.

What plans do you have for leaving?

The impact of the 2008 financial crisis and subsequent challenging economy damaged many people’s financial aspirations. Thankfully, many have seen a measure of recovery although we are a long way away from the pre 2008 levels of consumer confidence.

Every business owner should have a personal exit strategy. We sometimes refer to this as a ‘starting with the end in mind’ strategy. Key issues to consider could include:

  • Passing on your business to your children or other family members, or a family trust
  • Selling your share in the business to your co-owners or partners
  • Selling your business to some or all of the workforce
  • Selling the business to a third party
  • Public flotation or sale to a public company
  • Winding up
  • Minimising your tax liability
  • What you will do when you no longer own the business
  • Whether the new owners will need or desire your involvement after the sale

A fall in the value of your retirement funds and the value of property may influence your decision as to when you are able to retire.

Whatever thoughts you have concerning the sale of your business, we know from our experience that careful planning and the right advice is essential.

Indeed, creating and putting into practice appropriate strategies at each stage of your business life is essential if you are to obtain the maximum reward for taking the risks inherent in being in business.

When should you sell?

You need to weigh up the factors which might influence the right time for you to sell your business.

Throughout life, from childhood to retirement, circumstances and priorities change. At every stage it is important to make well-informed decisions to ensure that you and your family are following the best strategies for achieving your goals.

Charitable donations

Throughout your life you may wish to give money to charity. There are a number of ways in which it is possible to gift cash or assets to charity tax-efficiently. For example, under Gift Aid you can give a charity D1000 at a net cost to yourself of as little as D500. Charitable donations can also be included in your Will, and again they will attract tax relief. If you leave 10% or more of your estate to charity your rate of IHT may reduce.

Please speak to us for more information on making tax-efficient gifts to charity.

Childhood

It is never too early to begin planning for a child’s financial future. Parents, grandparents, and other relatives can assist in the early years by providing funds for the child’s education and future. This may, for example be through direct gifts, or by making payments into a Junior ISA.

Children should be educated in handling money responsibly. Budgeting can start with knowing that if you spend your pocket money on one sweet, you cannot spend it on another, and when you have spent it all there is no more money left until next week.

In retirement

After 40 or more years at work it is time to take a well-earned rest, but you still cannot take your eye off of your financial planning if you want to enjoy a long and comfortable retirement. This may also be the time to set some money aside for your children or grandchildren.

However, balanced against these desires may be the need to finance long term care for one or both partners or spouses, and the potential impact of this on your financial security.

Middle age

As the children approach higher education you will need to see to what extent you can help meet a share of the education and living costs. Although the maturation of savings plans which were begun when the children were born can help at this time, you might also need to consider making extra provision as many students now leave higher education with debts in excess of D45,000. Do you wish to assist your children in this area? Are you able to?

By now you may have reached your earnings peak, and as the children leave home and begin work you should review your strategies to ensure you are on target for a comfortable retirement. What are your realistic objectives? You might, for example, want to consider moving to a smaller house, acquiring a second home, or increasing your retirement funding.

Alternatively, you may find yourself in financial difficulty. If so, remember there is always a way forward. The first step is always to acknowledge the situation. The second is to quantify the amounts involved. This may not be easy, but only when this is done can you design a path toward loosening debt’s grip and advancing your investment plans.

Nearing retirement

If retirement beckons in the next fifteen years you will need to consider carefully and evaluate your income requirement and the extent to which your investments are going to deliver the return you require. You may also wish to help your children, and you still have to pay for a wedding. Investments, property and annuity rates are probably all lower than you might have expected before the economic and financial problems of recent years.

As you approach retirement, you need to review and update your plans at least annually to satisfy yourself that your accumulated capital is at less risk and to ensure that your income in retirement will meet your needs – and provide a little extra for the realisation of some of those long planned dreams.

Many people start retirement in debt. Do all you can to repay debt before retirement day.

At this point in life, it is worthwhile checking your state pension entitlement. This is done by completing form from Social Security. This statement will indicate whether you are entitled to the full state pension. There may be gaps in your state records where Social Security that you paid has not been credited to your records. This summary will also tell you what entitlement you have to additional pension.

You should also keep track of and up to date with the value of any private pension fund by monitoring and filing their annual statements

New parents

The imminent arrival of your first child, with the extra responsibilities and perhaps the need for more space, should trigger a re-evaluation of your personal financial strategies. One insurance company estimates that it now costs more than D227,000 to bring up a child to the age of 21.

The arrival of a child can mean moving from two incomes funding two people to one income funding three. Alternatively, it can mean funding childcare so that both parents can work. Although employers may provide a workplace nursery or childcare vouchers, these never cover the full cost of childcare.

Please contact us if you need any further advice on this.

Settling down

You may now be looking to move from renting to buying your first home. You need to save for the deposit and furnishings, and you will need to budget for the mortgage repayments and other household expenses (e.g. insurance, property related tax, repairs and utility bills that are an inevitable part of home ownership).

This is often the most difficult financial period. Budgets are tight, as the mortgage/rent repayments account for a large proportion of disposable income. It is important to prepare detailed budgets, which should always include an amount for contingencies for unexpected or one-off expenditure.

The teenage years

The teenage years are an important time to learn the ins and outs of budgeting and financial planning, as children begin to earn money for the first time, and save to buy things such as sports, hi-fis, and other technology equipment. It is during the latter teen years that managing finances independently will start if living away from home and attending University. Managing a budget, bank account and loans becomes part of everyday life for University students.

Young adulthood

With University education complete and hopefully a job, now is the time to develop a plan that allows financial reality to be accommodated, including student debt repayment which is automatically deducted from salary or payable through self assessment. These are often also the years when it is time to make provision for the purchase of a car and to plan for the purchase of a home. While it is probably way down the list of any financial priority it is also the time to start investing for retirement, even though retirement is a long way off and the initial investment may be modest. A small sum put away now for retirement has much longer to grow.

Q: How much should be invested for my pension?

A: Does your employer yet have a pension scheme? It is important to seek advice, but 10% of gross income is normally considered an absolute minimum.

Gifts to charity can take many forms. Perhaps you are already making regular donations to one or more well known charities, coupled with one-off donations in response to natural disasters or televised appeals. In this special supplement to our guide we will focus on some of the ways you can increase the value of your gift to your chosen charities through the various forms of tax relief available.

Making your wealth grow and being able to retire when and how you want is one of most people’s important financial objectives. But achieving this goal takes planning and perseverance.

Bank and building society accounts

Although, as we have already suggested, history records that long-term investment in shares will outperform savings with a bank or building society, you should not overlook (1) the somewhat higher degree of certainty over investment return, albeit current rates are less than inflation and (2) the (usually) ready access to your funds. Interest is liable to income tax.

Such accounts are often held as emergency funds. An ideal solution is to have instant access to a sum equal to at least two months’ income.

Bricks and mortar

Property, whether commercial or residential, is generally considered a long-term investment and there are signs that buy-to-let investors are returning to the market. The recession of 2008/09 saw many buy-to-let investors bale out of the market. The reduction in property values resulted in a less than buoyant rental market and has caused many to rue their investment plan.

However, returns have improved and many now see the current state of the market as a buying opportunity, but only the very brave are venturing to acquire property as an investment. ‘Buy-to-let’ mortgages may generally be available to fund as much as 75% of the cost or property valuation, whichever is the lower.

Those investing in property seek a gross return that covers all outgoings and a net return from rent which is greater than the interest that could be gained on deposit while the risk of the investment is weighed against the prospect of capital growth.

However advice on any property investment is always an area where advice is essential.

Build a framework

What you need is a realistic framework so you can better seize financial opportunities as they arise. To develop this framework for your financial decisions, follow the five Ds:

  • Decide where you are today – what has been the impact of the financial crisis?
  • Define where you want to be in the future
  • Discuss your goals and objectives with us
  • Develop with us a plan to move toward your goals, and
  • Drive forward to make it happen

Investment bonds

Those with a lump sum to invest might consider an investment bond. This is a life insurance product and the norm is to draw an annual tax free sum equal to 5% of the original investment for the life of the bond. On maturity, usually after 20 years, any surplus is taxable, but with a credit for basic rate tax. Higher rate tax might be payable, but ‘top slicing’ relief might apply.

Making sure the pieces fit

Putting your financial affairs in order against the current financial difficulties is a bit like completing a jigsaw, where the main pieces are savings, investment, protection, and taxation. If you get it right, the picture can be very attractive, but get it wrong and the picture can look very muddled. The problem is that life does not come with a picture on the lid. 

  • What do you do with your current investments?
  • How can you gauge the difference between saving and investing?
  • What sort of insurance do you need?
  • How much should you be salting away for your retirement?
  • Are you paying too much tax?

The answers to these questions are different for each person, depending on individual circumstances, but there are certain strategies that make sense in most cases. If you can identify the broad principles that are relevant to your situation, you can use them to improve your financial standing.

Use this section of our guide in the same way you would use the picture on the box of a jigsaw puzzle. The process is ongoing; you must monitor your plan and adjust it as necessary to ensure that you are moving in the right direction. It is a simple concept – yet many who build the framework for a plan fall short when it comes to implementing it. Don’t be one of them.

Making the most of your investments

When determining your financial strategy, it is important to understand the difference between saving and investing. If you save money on deposit with a bank or building society you will earn [a low rate of] interest.

If you buy shares or invest in a share-backed plan such as a unit trust or a life assurance policy, you will have the opportunity to earn dividend income and benefit from [potential] capital growth if the shares go up [and stay up] in value. Records show that in the long term the best share investments outstrip the best building society accounts in terms of the total returns they generate.

However, it is important to remember that shares can go down in value as well as up, and dividend income can fluctuate. If you choose the wrong investment you can get back less than you put in. The watchword, therefore, must be caution. You will need to consider the most important factors for you in your investment strategy.

Other tax-break investments

Investments under the enterprise investment scheme (EIS) and investments in venture capital trusts (VCTs) are generally higher-risk investments. However, tax breaks aimed at encouraging new risk capital mean that EIS and VCT investments may have a place in your investment strategy. There is an even more high risk version of EIS known as Seed EIS which has advantageous tax breaks to investors in start up businesses.

Setting desirable and realistic goals

This involves balancing head (financially prudent strategies) and heart (emotionally acceptable thresholds). You need to bridge the gap between what you can achieve financially with what you dream of doing. 

Try to meet your objectives by setting a number of short, medium and long-term goals and prioritise them within each category.

Common goals include the desire to:

  • Accumulate a sizeable estate to pass on to your heirs
  • Increase the assets going to your heirs by using various estate planning techniques, perhaps including a lifetime gifts strategy
  • Tie in charitable aims with your own family goals
  • Accumulate enough wealth to buy a business, a holiday home, etc
  • Be able to retire comfortably
  • Have sufficient funds and insurance cover in the event of serious illness or loss
  • Develop an investment plan that may provide a hedge against market fluctuations and inflation
  • Minimise taxes on income and capital.

Stocks and shares

Investment in stocks and shares gives, in theory, the best chance of long-term growth. On the other hand, it is often a volatile market, and should perhaps be avoided by the faint-hearted. Investment in unit trusts and investment trusts are designed to spread the risk, and add an element of management, without the expense of broker advice, for the small investor. Capital gains are charged to tax, as are dividends.

Tax efficiency

Paying tax on your savings and investment earnings is obviously to be avoided if at all possible. There are a number of investment products that produce tax-free income, including some National Savings products.

The enterprise investment scheme

Subject to various conditions, such investments attract income tax relief. Contributions may be carried back by one tax year provided the maximum amount for which relief is sought is not exceeded.

More importantly, they will attract unlimited CGT ‘deferral relief’ on the investment of chargeable gains, delaying tax which would otherwise be payable on disposals. 

Seed EIS is available only for investments in start up companies and has more restrictive conditions. It provides both income tax relief and a capital gains tax shelter on the funds invested.

Speak to us to see how the above schemes could help you.

When you have spent a whole lifetime building up your personal wealth, you want to think that upon your death your estate will pass into the hands of your chosen beneficiaries and not into the hands of the Taxman.

And yet, all too often we meet clients who are shocked at how much of their inheritance is taken from them before they even see it! At present rates, the Taxman can take up to 40% of your estate! Yes almost half its value!

Inheritance tax (IHT) used to be referred to as a ‘voluntary tax’ for the very wealthy, but with the recent dramatic increases in property values without a corresponding increase in the IHT threshold, many more estates have come within of the Taxman’s reach.

This makes estate planning all the more necessary – and all the more urgent.

There are a number of ways to reduce the potential tax liability on your estate, but they all involve careful planning – often over a long period.

Lifetime gifts, the judicious use of trusts, and care with transfer of agricultural and business property can all help to reduce IHT liability.

It is also possible to mitigate potential inheritance tax liabilities by arranging adequate life assurance cover.

We can help you with your estate planning, including succession planning and business exit strategies.

We can also help with the drafting and updating of your will, and where appropriate, act as trustees or executors.

Contact Us today to discuss how we can help you preserve as much of your wealth as possible for your chosen beneficiaries. But don’t leave it too late!

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