Calculating the tax benefits of incorporation

Produced by a Tolley Owner-Managed Businesses expert

Owner-Managed Businesses

Guidance

The Incorporation ― introduction and procedure guidance note details some of the key reasons why an unincorporated business may wish to incorporate. From a tax perspective, there are two key factors that will apply to all businesses considering incorporation:

•
a different effective rate of tax on extraction of profits
•
flexibility over income in respect of the timing and form of remuneration

In addition to these general factors, there will often be specific tax issues which may benefit particular business circumstances. There are a number of reliefs that are not available to unincorporated businesses. These reliefs may either relate to the taxation of the business’s profits or to its investors.

Effective rates of tax on profit

To ensure that a comparison of tax rates for sole traders and companies is meaningful, it is important that calculations compare like for like. It is therefore not useful to compare the rate of income tax and NIC on profits of a trade only with the rate of corporation tax. The sole trader is absolutely entitled to

Continue reading the full document

To gain access to additional expert tax guidance, workflow tools, generative tax AI, and tax research, register for a free trial of Tolley+™

TAKE A FREE TRIAL NOW

Popular Articles

Employment Tax

Incentives, awards and prizes

Incentives, awards and prizesIntroduction ― incentives, awards and prizesEmployers may use a variety of methods to reward and encourage employees in their work. These are commonly known as incentives, awards or prizes. For the purposes of this note, the term ‘award’ will be used to cover all

14 Jul 2020 11:57 | Produced by Tolley Read more

Value Added Tax

Exemption ― burial and cremation

Exemption ― burial and cremationThis guidance note provides an overview of the VAT treatment of services that are provided in connection with the burial or cremation of human remains.VAT treatmentThe following services are exempt from VAT:•the disposal of the remains of the dead•making arrangements

14 Jul 2020 11:38 | Produced by Tolley Read more

Trusts and Inheritance Tax

Gifts with reservation ― overview

Gifts with reservation ― overviewIntroductionA gift with reservation (GWR) arises when an individual ostensibly makes a gift of his property to another person but retains for himself some or all of the benefit of owning the property. The legislation defines a gift with reservation with reference to

14 Jul 2020 11:48 | Produced by Tolley Read more

��Ƶ