Some words of wisdom from Dale Carnegie - not tax but worth reading about!

How to Win Friends and Influence People

This is Dale Carnegie's summary of his book, from 1936

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Table of Contents

1. Fundamental Techniques in Handling People
2. Six Ways to Make People Like You
3. How to Win People to Your Way of Thinking
4. Be a Leader: How to Change People Without Giving Offense or Arousing Resentment

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Part One

Fundamental Techniques in Handling People

1. Don't criticize, condemn or complain.
2. Give honest and sincere appreciation.
3. Arouse in the other person an eager want.

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Part Two

Six ways to make people like you

1. Become genuinely interested in other people.
2. Smile.
3. Remember that a person's name is to that person the sweetest and most important sound in any language.
4. Be a good listener. Encourage others to talk about themselves.
5. Talk in terms of the other person's interests.
6. Make the other person feel important - and do it sincerely.

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Part Three

Win people to your way of thinking

1. The only way to get the best of an argument is to avoid it.
2. Show respect for the other person's opinions. Never say, "You're wrong."
3. If you are wrong, admit it quickly and emphatically.
4. Begin in a friendly way.
5. Get the other person saying "yes, yes" immediately.
6. Let the other person do a great deal of the talking.
7. Let the other person feel that the idea is his or hers.
8. Try honestly to see things from the other person's point of view.
9. Be sympathetic with the other person's ideas and desires.
10. Appeal to the nobler motives.
11. Dramatize your ideas.
12. Throw down a challenge.

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Part Four

Be a Leader: How to Change People Without Giving Offense or Arousing Resentment

A leader's job often includes changing your people's attitudes and behavior. Some suggestions to accomplish this:

1. Begin with praise and honest appreciation.
2. Call attention to people's mistakes indirectly.
3. Talk about your own mistakes before criticizing the other person.
4. Ask questions instead of giving direct orders.
5. Let the other person save face.
6. Praise the slightest improvement and praise every improvement. Be "hearty in your approbation and lavish in your praise."
7. Give the other person a fine reputation to live up to.
8. Use encouragement. Make the fault seem easy to correct.
9. Make the other person happy about doing the thing you suggest.

How to divert your income and pay less tax!

If you are a higher rate taxpayer (like more and more people nowadays!), you may be able to reduce your taxes by transferring some of your income to others, so that the income can be taxed at a lower rate of income tax or not be taxed at all!

It sounds reasonable, doesn’t it? (Especially if good old wife or husband does some work for the business, wouldn’t it make sense to reward them by transferring some of your shares in the company to her or make her a partner in the partneship or allocate some rentals from a property lettings business to her?)

The problem is that the taxman doesn’t like arrangements which he believes were made just with tax avoidance in mind. If the taxman thinks so in your case, he will most definitely disallow the transaction and treat the income as yours.

To escape this nasty piece of legislation, you need to make sure you plan and organise your affairs the proper way. Certain things work and others don’t.

For example, outright gifts might work. But, their presence might not be enough to steer you away from trouble. As the taxman has made it clear in the following statement: -

“it is essential to look at the whole arrangement. This could include a series of transactions, some of which may be commecial or involve outrright gifts between spouses and some others not. If the overall effect of the whole arrangement is to transfer income from one individual to another, the settlements legislation is likely to apply”.

Effectively the above stance of the Revenue is a “catch-all” attempt by the taxman directed towards scaring people from planning their tax affairs in a more tax-efficient way for them.

To sum it up, you can reduce the risk of being caught and stay on the safe side by ensuring that:
• Do not re-allocate income without any corresponding quid prop quo,
• People are getting rewarded in proportion to their contribution in the business,
• Any arrangements are on a commercial basis i.e. not only rewards but also risks of ownership are transferred.

How to grow your business

I was recently reminded of some eternal wisdom coined by marketing guru, Jay Abraham. He states that there are only three ways to grow a business:

1. Increase the number of your customers or clients.
2. Increase their average transaction value.
3. Increase the frequency of their repurchases.

Jay simply says that to grow your business, simply find a way to maximize each one. Moreover, if you can nudge all three a little higher, your growth will be exponential!

To increase the number of your customers, you just need to open up your routes to market. That means meeting more people, networking more productively and effectively, increasing your connections and leveraging your existing relationships for referrals, recommendations and introductions.

To increase their average transaction value, all you need a greater share of their wallet. This is the domain of cross-selling and up-selling, and you do that by going deeper with your relationships.

When you find out where people are hurting, what's causing their pain and what's giving them problems.To increase the frequency of their purchases, simply keep in contact with them.

Find reasons to connect, to stay in touch and to give them reasons to keep coming back. then you will sell more, more often and make more profit:)

Why can't I claim lunches?

Here is a very common question I am asked and Bob Harper of Crunchers has kindly answered it in his blog.

It goes like this......

Many people make the mistake of thinking lunches are tax deductible. Common examples include being away from the office and taking an employee or customer out for lunch to talk business. One of the reasons this issues causes confusion is because people are used to claiming expenses back, either as an employee or from their business.

If you run your own business you can claim the money back from your business. But this doesn’t mean your business will be able to claim the expenses for VAT or tax. The correct treatment depends on the type of expenses and why it was incurred.

Lunches are simple because the tax law is clear. A business can not claim the cost of lunches for VAT or tax. You can claim the money back from your business and the expenses may appear in your business accounts. But the VAT should not be claimed in your bookkeeping and when the tax is calculated at the year-end your Accountant will add back the expense.

The good news is that there is one exception - Christmas lunches. At the time of writing a business can claim the full cost up to £150 per head. And, it doesn’t have to be a Christmas lunch. You can have more than one event but be careful not to exceed the limit. If you go over by just £1 everyone will be taxed personally on the full amount. Not something you want to wake up to in the New Year!

To read more of Bob's Blogs click here

Guilty until proven innocent

Well HMRC are up to their tricks again. Ken Frost has been writing about it in his blog.
this also links to a great story from journalist Nick Brighton whose blog is here.

Read on - and BE AFRAID!

Seriously though - any client of mine should take up the offer of tax investigation insurance which we offer. We make no money from this and I even bought it myself!

How to Pay Off Your Residential Mortgage and Claim Interest Relief

Here is an outline a tax-efficient strategy for property investors with a mortgage on their main residence.

Now, doesn’t that sound like a great idea – getting tax relief on the mortgage interest that you pay on your main residence?

Well, you will be pleased to hear that it is possible by following a simple (and relatively unknown) tax relief and some creative financial planning.

The Basics
As most property investors are aware, it is not possible to claim interest relief on your main residence. This is because your main residence does not form part of the property business.
Therefore, because no rental income is received from your main residence, (exception being the rent-a-room-relief), you cannot claim interest relief against your income.
However, you will also be aware that you can claim interest relief on properties that form part of your property business i.e. your buy-to-let portfolio. In such instances you can offset your mortgage interest on your let properties against any rental income received.

Introducing BIM45700
BIM 45700 was first introduced by us back in October 2004. In an article, we identified how this little known strategy gave landlords the opportunity to release equity from their investment properties and offset the interest regardless of what the equity release was used for.
The only restriction is that the equity release cannot be greater than the market value of the property when it is brought into the letting business. If the property had been originally bought for letting, this amount would be the purchase cost of the property.

So How Do We Get Tax Relief on Our Main Residence?
Well there are two ways to achieve this:
Remortgaging existing buy-to-let property/portfolio
Those of you who have or are growing a buy-to-let portfolio are likely to have equity in the property. The example below shows how/when this equity can be released to give you a tax benefit.

Example
John buys a rental property for £200,000. He provides a £40,000 deposit and borrows £160,000. 5 years later the property has increased to £250,000. This means that he has £90,000 equity in the property.
He decides to remortgage the property to a value of £200,000 thus releasing £40,000 of equity from the property. He uses the £40,000 equity release to reduce the mortgage on his main residence by £40,000 and still claims interest relief on this equity release.

Now you will be asking how is this possible?
Well, don’t forget the property was brought into the lettings business when it was purchased for £200,000. The additional amount of equity released has not taken the borrowing over £200,000, so the entire interest amount charged can still be offset against the rental income.
So, if say, for example he is paying £200 a month interest on the £40,000 then he will be able to now offset this interest against his rental income.

Result:
Reduced debt on the main residence
Borrowing moved to buy-to let property upon which interest relief can be claimed against the rental income

Now, this is just an example of a single property. Imagine if you have 2, 3, 4 properties or more and have the ability to withdraw equity as in the example shown above?

By using this same strategy on a number of properties, you could shift the entire debt from your main residence on to your buy-to-let property portfolio and claim interest relief on the entire amount!

Moving Equity from Previous Residence
Another useful tax trick is to remortgage a previous main residence. Again this strategy is best illustrated by an example.

Example
Lisa and John buy a property for £100,000 (£20,000 deposit and £80,000 mortgage). They live in the property for five years and then decide to buy another property. Instead of selling their existing residence they decide to get onto the buy-to-let ladder and let the property out.
The cost of the new property is £200,000, and at the time of letting, their previous residence is worth £150,000.

They increase their debt on the previous residence from £80,000 to £150,000 i.e. they release £70,000 of equity. They then use this equity release to reduce their mortgage on their main residence by £70,000.

Once again, because the additional amount of equity released has not taken the borrowing over £150,000, (the price when it was brought into the lettings business), the entire interest amount charged can still be offset against the rental income. If the interest charged on this amount was £250 per month then this is a significant saving every month.

Once again, with this little trick we have:
Reduced debt on the main residence
Moved borrowing to buy-to let property upon which interest relief can be claimed against the rental income

Conclusion
As you can see, sometimes with a little bit of creativity you can bring significant tax savings! It is possible to get even more creative with this tax break but we’ll leave these strategies for another time.

Article courtesy of Arthur Weller & Amer Siddiq
Arthur Weller and Amer Siddiq are contributors to Property Tax Portal.

April Tax Tips

To see this months tax tips and news click here

Business tax changes taking effect this week

• All businesses can write off 100% of the first £50,000 of investment in plant and machinery each year against their taxable profits under the new Annual Investment Allowance. This can have a significant impact on Child Tax Credit claims and many people can benefit from caeful tax planning.

• Other capital allowances are being reduced. After the first year, firms can now write off 20pc of the cost of new investment in plant and machinery against their taxable profits, down from 25pc. Industrial, agricultural buildings and hotels begin to lose their 4pc annual allowance against the cost of construction. It falls to 3pc this year and will be phased out completely in 2011. A new 10pc rate for integral fixtures and fittings is also being introduced.

• Empty property relief is reformed. At present unlet industrial properties are exempt from business rates and the tax only becomes payable on office and retail space after three months and then at only half the normal rate. From April 6 this year, full business rates will be due on empty shops and offices, and on industrial space after six months.

• Self-employed people earning up to £30,000 now only need to send HM Revenue & Customs (HMRC) their turnover, expenses and net income following the doubling of the turnover threshold. But accountants said they still have to keep records of what is spent in case of enquiry. HMRC has also removed a disincentive to file early. From April 6, it will have 12 months to launch an investigation from the date the business accounts are filed rather than 12 months from the filing deadline of January 31 each year.