How efficient was your business at tax year end?

how-efficient-is-your-business-at-tax-year-end
  • Author : Lee Badger
  • Date : 30 Mar 2021

For Adviser use only

Advisory firms work hard for their clients at Tax Year End, advising on how to make the most of their family tax allowances. With the dust settling, however, you might have a chance to reflect on how efficient your internal processes were during that rush and what business risks you faced at that stressful time of year. The right platform selection could make this easier for the support teams in advisory practices next time round.

Some platforms provide good functionality to allow simple GIA to ISA transfers within the client journey, with the option to use the available cash in the GIA, or to sell down assets, from one online process.

See here for a video on Novia’s GIA to ISA process.

But to truly create efficiency and minimise the business risk within the advisory firm, it’s not just about whether a platform has a simple GIA to ISA online process, it’s also about whether the platform offers the complete package, consisting of:

  • A CGT Calculator with ‘what if’ scenario planning options
  • A Flexi-ISA
  • A Junior ISA

Without all these components on one platform, the tax year end process can be very disjointed, timely and stressful for an advisory firm, as they will likely be running internal excel spreadsheets to work out tax gains, then making recommendations to move assets between providers to utilise their clients’ family tax allowances.

You might think every platform offers this trifecta of solutions to support their online Bed & ISA process, but research from The Langcat indicates otherwise:

  • 50% of platforms do not have a Flexi-ISA
  • 37% of platforms do not offer a Junior ISA
  • 31% of platforms do not offer a CGT calculator with ‘what if’ scenario planning options

So why are these components so valuable to clients and advisory firms?

Why do I need access to a Flexi-ISA?

A flexi-ISA’s design allows a client to make extra contributions to replace any withdrawals they’ve already made in the current tax year.

If a client had withdrawn £10,000 from their ISA mid tax year for a home emergency, a flexi-ISA allows the adviser to advise the client that they can in fact pay £30,000 into their ISA in that tax year, rather than just the usual £20,000 allowance.

But if the platform you are using doesn’t offer a flexi ISA and you are therefore not able to help them do this at tax year end, they are left with £10,000 extra in their GIA suffering a less advantageous tax position, impacting their returns over time and leaving you unable to maximise your client services.

Why do I need access to a Junior ISA?

Generational tax planning using a Junior ISA is becoming an interesting advice area now that parents can contribute up to £9,000 per year into their child’s Junior ISA to build up a fund which can be withdrawn from age 18 tax free, allowing parents to save tax-efficiently to help their children fund university fees, or to help with a deposit for their first home.

This is now a key part of tax year end planning for advisers with parents who have excess assets, to maximise their returns as a family by paying less tax.

This also allows advisers to align the investment strategy for the Junior ISA to that of the parents, rather than the parents having to suffer the inefficiencies and restrictive investment options of holding these assets off platform through an ‘old fashioned’ Child Trust Fund CTF).

See a video announcing the launch of the Novia JISA

Why do I need access to an Integrated CGT Calculator with ‘what if’ options?

A CGT calculator that automatically works our tax gains or losses at fund level – without having to manually input valuations and unit prices – makes an advisory firm’s tax year end process simple, reducing their business risk.

This type of functionality allows the advisory firm to check various scenarios before making any sale requests, allowing them to target a specific gain, or specific proceeds. These systems calculate and present the suggested assets to sell, to achieve the specified outcome.

It is also important that your platform provider allows the flexibility to capture previous acquisition costs in respect of re-registrations and in-specie transfers, to ensure accurate tax calculations can be completed to avoid over taxation. Normally CGT tools assume the book cost to be the point of re-registration and thus capture an inaccurate valuation for the tax calculations.

See a video about the addition of ‘What If’ scenarios to the Novia CGT calculator.

In summary, tax year end planning can be a very efficient process. You may be interested to see our Tax Planning Video from last March, by clicking the image below. More features have been added since this video was made, so if you currently use the Novia platform and want a refresher on any of these features and want to find out what’s new, or if your current platform of choice does not offer the crucial combination of features described above, then please contact your Novia Account Manager or Regional Sales Manager to see how you can improve your business efficiencies and reduce your business risk.

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