Business Tax Comparison Workbook
Reviewed by Mark McLaughlin ATII ATT TEP
It is usually the case that software producers are quick to identify the 'hot
topics' in tax, such as 'IR35' or the 'company car vs cash' dilemma. The 'Business
Tax Comparison Workbook' deals with another popular issue for business taxpayers
(and their accountants), namely whether an unincorporated business should incorporate
from a tax perspective. Like Payexcel Limited's other products ('PAYExcel' and
the 'Car Benefit Workbook'), it is built on Microsoft's Excel spreadsheet software,
with which most computer users will be familiar. This is an advantage in itself,
as it should save the user time in getting to know the product.
Summary
The 'should I incorporate my business?' scenario broadly involves a comparison
between the tax payable on profits by a sole trader (or partnership) with the
tax payable by a company and its directors / shareholders on an equivalent amount
of profits. Another way of expressing this comparison is in terms of retained
(i.e. post-tax) income. Like Payexcel's other products, the Business Tax Comparison
Workbook is simple to use and the worksheets relatively easy to understand.
The Contents
As mentioned, the format is an .xls spreadsheet, with a number of worksheet
tabs across the bottom of the page. I would recommend that the user read the
'Quick Tour' first, which introduces each of the worksheets and their purpose,
to get a feel for the workbook and its capabilities.
Using the Business Tax Comparison Workbook
The 'input' worksheet requires users to enter the relevant data about the business,
such as the accounting period, number of partners (if applicable), number of
potential directors in the limited company, number of associated companies (if
applicable), and the profits of up to 3 accounting periods for comparison purposes.
There is also a 'tax tables' worksheet, showing the various tax and NIC rates
that are relevant to the calculations. This data covers years up to 2004/05.
Obviously, tax rates for later years are not yet known, and the worksheet therefore
allows the user to estimate those rates for illustration purposes.
Having input all the data, there is a worksheet for each of the years under
review (up to a maximum of 3 years). The workbook calculates the tax and NIC
liabilities of a business for the opening 3 years.
The worksheet computations can also be used to show the position for a limited
company compared with an unincorporated business. The difference in tax and
NIC between the two is clearly shown, together with a comparison of 'net disposable
income'. The figures are calculated on a 'tax year' basis (or 'financial year'
basis for companies), which means that in the case of companies with accounting
periods ending on a date other than 31 March, there is an apportionment of profits
in the computation to arrive at the tax position for the financial year, i.e.
1 April to the following 31 March.
There is scope to 'play' with the figures in the computational worksheets.
In particular, the user can input directors' remuneration at different levels.
The amounts of dividends and retained profits in the incorporated business can
also be adjusted as required. The computational worksheets for all three years
are usefully presented in a separate 'summary' page.
To assist in the process of forecasting, calculating and reporting taxable
profits, there is a 'profit' worksheet for each of the 3 years. These pages
are set out in the Inland Revenue's standard reporting format (i.e. the 'self-employment'
supplementary pages of the self assessment return).
The Verdict
As with Payexcel's other products, the main benefits of the Business Tax Comparison
Workbook are its simplicity and ease of use. The workbook deals with the position
for new businesses, although in most situations users will be dealing with existing
businesses in the context of a possible incorporation. It would therefore be
useful if the opening year calculations could be overridden. Having said that,
the workbook can handle comparisons for existing businesses. This product should
be ideal for the majority of unincorporated businesses and small / family companies
that most accountants deal with on a regular basis. It certainly saves a lot
of number crunching!
Further information
For further information on PAYExcel software and the cost, visit www.PAYExcel.co.uk.
Read our review on their other products:
- PAYExcel Software
- Car Benefit Workbook
Disclaimer
The views expressed in this review are those of the writer only and not necessarily
those of TaxationWeb. No responsibility can be accepted by the writer or TaxationWeb
for any loss arising from action undertaken or refrained from as a result of
this review.
Mark McLaughlin
August 2002
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