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Corporate planning opportunities: Gareth Marr, Advisory and Brokerage Services

The corporate IFA will concentrate on the planning opportunities around National Insurance and corporation tax changes.
With the new nil rate band on profits up to £10,000 there are now five different rates of corporation tax.

Profits Rate
£0 – £10,000 0
£10,000 – £50,000 22 per cent (estimate)
£50,000 – £300,000</TD 19 per cent
£300,000 – £1.5m 32.5 per cent
more than £1.5m 30 per cent

The main ways to mitigate corporation tax is to pay earnings or pension contributions. The IFA should therefore concentrate on helping owner/managers of businesses to firstly reduce profits below the two marginal rates of 22 per cent and 32.5 per cent, and then aim to get profits below the £10,000 level.
It is assumed the client will be taking earnings anyway so the advice will focus on what should be done with the &#39extra&#39 profit above directors normal earnings.
A look at some of the options should point the way.

Option Tax Cost
Pension payment 0
Bonuses, after higher rate tax employer and employee NI contributions 53.9 per cent
Dividends</TD 40 per cent
Dividends is profits below £10,000 25 per cent
Pay non-earning spouses up to nil rate band 0
Pensions for spouses 0

Obviously this is just a snapshot and needs to be taken on reducing pensionable earnings that might reduce benefits. One final thought &#45 for the seriously successful entrepreneur client forget income and pensions and just concentrate on building businesses and selling them in three y ears &#45 effective tax rate of 10 per cent.

Gareth Marr is chief executive of Advisory and Brokerage Services


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