OCTOBER 2023 AFTERMARKET 13 www.aftermarketonline.net # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # PRODUCT GROUPS IN 8 WIDE RANGE automotive parts Remanufactured RING LS ECONOMY AR PART OF A CIRCUL FACTUR USED IN REM 96% LESS RAW MATERIAL OE MATCHING QUALITY ANUF P ! ! $ $ & $# " $ % $ ! $ $ " $ $ % $ % % $% " $ " " % $% $ ! % " $ $ " %" "$ " $ " ! % " " % !$ $ % " " $ "$ % $ &%$%"! % ! $% " $ % " pension. Kieron explains that with a NI level salary “the company will also receive a corporation tax deduction for the salary paid, unlike dividends which come out of post-tax profits – a potential saving.” But there are other considerations beyond a NI level salary for those extracting monies from a limited company says Kieron. He refers to the relevance of the state pension age. Here Kieron says that “if an individual is over state pension age and therefore at a point where no employee national insurance is due, then they should run calculations as to whether salary is more efficient than dividends.” Lastly, Kieron advocates keeping an eye on ever changing tax rates. Specifically, he says “it is always worth taking advice or running calculations to check that the rule of thumb is still most tax efficient.” Trivial benefits add up Another mistake that Kieron sees directors – and their companies – often making is the failure to use the trivial benefits exemption. Effectively, under the exemption, a director can receive six lots of £50 gifts from their company each year with no tax implications. But there are rules to observe and Kieron details that “the gift cannot be cash, or a cash vouchers, and it also can’t be a reward for service or performance, but as long as there are six reasons throughout the year then the company can provide a director with up to six gifts throughout the year - completely tax free.” What happens at the end? Kieron says that as a sole trader, it can be relatively straight-forward to end a business as “all income was taxed as it was earned, leaving the individual to just ‘walk away’ from it.” But the situation is very much different for a limited company. Here he says that “thought needs to be given on how the company may be wound up.” He asks: “Can the company be sold? Is it going to be passed to the next generation? Has the company come to an end and if so, how are funds going to be extracted - by dividend or through liquidation?” From his perspective, too few company owners think about the end game in good time and so either lose value, pay too much tax on the exit or both. The right advisors Kieron moves to his final point - making sure that company owners have the right advisors in place to offer the most up to date and bespoke advice for them and their business. He’s naturally biased, but nevertheless says that “having the right advisors at the right time can help save tax upfront, down the line, and helps avoid any pitfalls that come with running a company.” As he says, “in the fast-paced world in which we live, what can be sound advice today, might not hold true in six- or 12-months’ time.”
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