Professional firms face many challenges in the current business environment. As one of the leading firms specialising in advising this sector, we are ideally placed to help firms deal with those challenges. We have particular expertise working with architects, property agents, law firms, property and construction consultants and patent and trademark attorneys.
As a top 20 firm of Chartered Accountants, we have the range and depth of resources to provide you with a fully integrated service, including tax planning, accounting and corporate finance services.
Our professional firms group comprises eight partners supported by managers with specialist knowledge gained through working with many professional firms. This enables us to provide clear and concise advice that adds value.
Our Senior Partner, Sir Michael Snyder, chairs the Professional and Business Services Group. The Group produced a report to review in detail the important issues facing professional firms and made proposals for practical action by Government and the sector itself.
Kingston Smith combine professionalism and attention to detail with a friendly approach. Their detailed knowledge of our practice helps us identify problems and find solutions.
Ken Winberg, Practice Director
An LLP is taxed as a partnership with the members being taxed on any profit share they are entitled to. This will generally mean that individual members will pay personal tax on their taxable profit share whilst corporate members will be taxed through corporation tax. Individual members will also be liable to pay Class 2 and Class 4 National Insurance contributions on their profits.
Other things to consider are that any traditional partnership converting to an LLP will receive relief from stamp duty on any property transferred in the first year, subject to conditions.
Dividend payments are also subject to higher rate personal tax in the hands of the recipient individual; this is usually collected through the self assessment tax return. In a climate of falling corporate tax rates and rising personal tax/national insurance levels, there is an increasing trend to opt for the dividend route when taking money out of a small or medium sized entity.
The total effective tax rate depends upon whether the recipient is a higher rate (40%) taxpayer with annual income up to £150,000 per year, or an additional rate (currently 50%, but falling to 45% from April 2013) taxpayer with income in excess of £150,000.
To the extent that shareholders are basic rate (20%) taxpayers with annual income below £42,475 (in 2012/13), they will have no further tax liability on the receipt of dividend payments.
This is allowable where it is wholly and exclusively for the purposes of the trade and it is not incidental to entertainment provided for customers. The whole cost of the event should be allowable as a deduction, provided the scale of the entertainment is not excessive. However, it is also likely that their will be a taxable benefit in kind assessable on the employees. In order to avoid this benefit in kind charge, the employer can include the benefit in a PAYE Settlement Agreement, but note that tax is due on grossed up benefit.
Annual Staff Event
There is no benefit in kind charge on employees for annual events provided the total cost is less than £150 per head per tax year. In order to qualify for this relief, the event must be an annual event and open to all employees, to all employees at one location or within a department.
Hospitality and entertaining of customers and business contacts is generally not allowable for Corporation Tax purposes. Following a European Court case in 2010, it is possible to recover the VAT on entertaining foreign customers. Where the entertaining is incurred for business purposes, there should not be a taxable benefit in kind on the employee.
Depreciation is not deductible for tax purposes and, instead, capital allowances are available at an official rate set by HMRC. An annual investment allowance is available to allow a full tax deduction on investment in qualifying plant and machinery; it is currently available on the first £25,000 per annum from April 2012.
Every member of an LLP is considered in law to be an agent of the LLP, and, as such, may represent and act on behalf of the LLP in all its business. As a third party would not normally have access to any partnership agreement, they would be entitled to rely on the fact that the member is an agent of the LLP. Anyone entering into financial transactions, such as leasing or factoring agreements, or lending money to the LLP, may still require personal guarantees from the members in the same way that shareholders of a limited company often give guarantees as security.