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PETER RAYNEY examines how incorporating a company can lend itself to further tax savings
KEY POINTS
- Deferring capital gains on incorporation.
- Entrepreneurs’ relief and goodwill.
- Care must be taken in valuing goodwill.
- Intangibles related-party rules may apply.
- No time like the present.
We have now entered the era of super tax rates which means that many successful sole traders and partners are exposed to a top rate of 51% (including 1% National Insurance) on a large slice of their profits.
To put it another way this means that only £49 out of every £100 of profit earned will be available for personal drawings or reinvestment within the business.
It is not surprising then that we have seen many highly profitable sole traders/partnerships/limited liability partnerships rushing to incorporate.
The obvious tax carrot being offered with a company is that profits can be retained at...
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