Tax-saving opportunities for individuals and practices - Veterinary Practice
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Tax-saving opportunities for individuals and practices

Mark Harwood examines the Chancellor’s autumn statement to see how people and practices might benefit from his various announcements – but highlights some potential pitfalls

“GOOD news?” I hear you say!
Whilst for the last three years
George Osborne must have been
tempted to shout “I’m The
Chancellor, get me out of here”,
he did in his pre-Christmas
Autumn Statement appear to be
more comfortable, having
seemingly started to claw Britain
out of its financial jungle.

On the economy at large, he was
reasonably upbeat at the time with
favourable government
prospects for
2013 up to
1.4% from
0.6% in

Turnover and profit growth have
remained relatively flat for many
practices over the last few years in
real terms, although some practices
have bucked the trend and have
achieved double digit percentage

What tax-saving opportunities are
available to you and your practice, and
what are the potential pitfalls?

Changes to automatic
self-employed status of LLP

The changes below will take effect
from 6th April 2014 so there is time
to plan if any of them apply to your

These changes only apply to LLPs
and not to general partnerships. HMRC has introduced a new
concept, which they have called
“salaried member”. Basically, if you
are deemed to be a salaried member
then you will be employed for tax purposes.
In order to be treated as a salaried member, i.e. employed as opposed to
self-employed, an individual will need
to satisfy all three of the following

  1. Payments made by the LLP to the
    individual are more akin to those for
    provision of services to the LLP and
    are not calculated by reference to the
    overall profitability of the LLP; and
  2. The individual does not have a significant influence over the
    management/affairs of the LLP as a
    whole; and
  3. The individual has made a capital
    contribution of less than 25% of his
    or her total expected profit share for
    the year.

Therefore, in order to remain self-
employed (with the associated tax
benefits), an individual needs to be
able to break one (or more) of the
three conditions above.

HMRC has provided guidance on
what would amount to breaking these
conditions and you should consult
with your adviser if you feel that this
is an area that affects you.

Interaction of limited
companies and partnerships

There is a great deal of detail in the
draft legislation but, in essence, it
seems that practices which are LLPs
or partnerships and already have one
or more limited companies in their
structure, will be able to continue in
the way they are operating as
members/partners at present until we
get to 6th April 2014.

The following changes do not
apply to stand-alone companies.

From 6 April 2014:

  • Any profit shares going into
    corporate partners will need to be
    seen to be commercially defensible;
  • Where profit shares are not
    commercially defensible, the new
    legislation will reallocate the
    “excessive” profits (initially allocated
    to the limited company) to the
    appropriate individual partners;
  • Service companies/corporate
    partners that operate on a commercial
    basis will remain unaffected;
  • Loss relief will be restricted if the
    individual is party to arrangements
    where the main purpose is for loss
    relief to be given to the individual
    (rather than a non-individual, e.g.
    corporate partner);
  • Individuals who have transferred
    their partnership share into a limited
    company that is owned by them will
    be able to continue with those
    arrangements until 5th April 2014
    and, for some, beyond that date as

In addition to the above there is
simple, but effective, anti-forestalling
legislation drafted to prevent those
affected altering their structure to
circumvent the changes. That
legislation has an effective date of 5th
December 2013.

Corporation tax

On a more opportunistic note,
company corporation tax rates are
continuing to reduce and therefore
using a limited company will for some
be more beneficial than ever.

National Insurance saving

There was welcome news that from
April 2015 there will be an exemption
from employer’s National Insurance
contributions for all employees under
the age of 21 who are earning less
than £813 per week.

Business rates

Various small changes to business
rates were introduced which are generally of help to smaller practices
rather than larger ones. One of these
changes is that from April 2014 it will
be possible to spread business rates
over 12 months as opposed to the
current 10 months.

Tax-free personal allowance

For individuals, the personal
allowance was confirmed as rising to
£10,000 in April 2014. In addition, a
new transfer of the married couples’
allowance of up to £1,000 will be
introduced for basic rate taxpayers in
April 2015: this presents a tax saving
opportunity where one spouse is non-
working and not an owner in the
practice, of about £200 per year.

Own a second home?

A fast ball has been thrown in the
form of a change to the Principle
Private Residence relief.

Under current legislation, if you
sell a residential property which has
been your private residence at some
point, the last three years of
ownership is automatically exempt
from Capital Gains Tax, regardless of
whether it was still your private
residence at the time of sale. This
three-year period is reducing to 18
months from April 2014.


There continue to remain plenty of
opportunities to structure your
practice and personal affairs in a tax-
efficient manner. To ensure that you
are in the best possible position you
should ensure that you speak with
your accountant on a regular basis.

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