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Business Tax Comparison Workbook |
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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: 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 |
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About The Author  Mark McLaughlin is TaxationWeb's Co-Founder, Director and Technical Editor. He is a Fellow of the Chartered Institute of Taxation and a member of the Association of Taxation Technicians and the Society of Trust and Estate Practitioners. He lectures on tax subjects, is co-author of Tottel's IHT Annual and Ray & McLaughlin's IHT Planning, and Editor of Tottel's Tax Planning and Annual series. Mark's work has also been published in Taxation, Tax Adviser, Tolley's Practical Tax, Tax Journal and Simon's Weekly Tax Intelligence. Since January 1998, Mark has been a consultant in his own tax practice, Mark McLaughlin Associates, which provides tax consultancy and support services to professional firms. He publishes a regular 'Tax Update' e-Newsletter for clients and other professional firms. To receive future copies, contact Mark via his website. |
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Article Added Friday, 10 October 2008 |
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