The Smart Frog was down the pub the other day and was asked by a fellow amphibian (not a tax expert) whether he should buy his next piece of artwork in his own name or in the name of his company. The immediate answer was to buy personally in order to avoid the infamous double-tax charge if acquired through the company.The question was then posed: "Why?".
Usually, clients accept advice without wanting to know the in's and out's. But in this case, the Smart Frog's friend was curious to know exactly why. And so the Smart Frog talked it through with him, bit by bit, piece by piece.
This was a useful exercise because advice like this, which is "written in stone", is often a moving target and does sometimes change when tax rates and rules change. As we all know, capital gains tax has changed dramatically over the last 15 or so years - the abolition of indexation allowance, the introduction (and subsequent abolition) of taper relief, to name a couple of changes - but now with the 28% CGT rate it appears, in the Smart Frog's friend's case at least, that the tax savings of owning appreciating assets personally aren't necessarily as high as they used to be.
The advice given was very general, with the concluding comment "ask your accountant". Giving specific advice to friends is fraught with problems, and you can never charge the going rate anyway, so why put oneself in a vulnerable position without knowing the full facts? Impart a little advice, appear very clever, and your friend will be forever grateful.
But what has this really taught the Smart Frog? Be careful who you drink with - you might just spend the whole evening talking tax. Yawwnnnnn.....
Posts
