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HMRC has updated its guidance on the new penalty regime, which will apply to VAT accounting periods commencing on or after 1 January 2023. It says that during the first year of the new rules it will waive the penalty that applies.

Writing off an overdrawn director’s loan account can be more tax efficient than paying extra salary to cover it and has a cash-flow advantage. The trouble is HMRC may argue that NI is payable, which makes it inefficient. Pay a dividend to cover the debt instead; this has the same advantages as a write-off with no NI risk.

The waiver will count as taxable income for the company. It can also trigger or increase an inheritance tax bill. Both tax liabilities can be avoided if the company gives you ordinary shares in exchange for waiving the debt. The company gets to keep the money without any of the nasty tax consequences.

You must cease using the cash accounting scheme if your sales exceed £1.6 million (excluding VAT) in the previous twelve months. However, if exceeding the threshold was a one-off event and you expect your sales to return to below £1.35 million in the next twelve months you can continue to use the scheme.

The rules make the owners of a foreign company liable to UK tax on gains it makes. However, since 2013 this doesn’t apply unless the reason for using the foreign company is an arrangement to avoid UK capital gains or corporation tax. Using a foreign company to prevent say, the foreign succession rules applying doesn’t count as avoidance.

Capital gain calculations for assets purchased or sold using foreign currencies must be made in sterling. This means that exchange rate fluctuations between purchase and sale affect the amount of taxable gain or loss. Mortgage costs must not be taken into account when working out a gain or loss even where they are affected by exchange rate changes.

HMRC, generally attributes the money in a bank account as belonging to the person who contributed it. This can be difficult to establish. Therefore, keep a record, e.g. a note on the bank statement, of who makes each deposit and withdrawal and for what reason. Also record any gifts of money in the account from one account holder to the other.