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Coventry Accountants Blog – Top Tax Tips

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Tax - not the most exciting topic for a blog, but at a time when income and profits are under pressure, it is important to make sure that your approach to tax and profit extraction is as good as it could be.

For those with profits in excess of £100,000 there are special tax schemes to mitigate tax liabilities. However, this blog is aimed at small businesses with profits of under £100,000, with the aim of maximising the percentage which goes into your pocket.

So what can be done to minimise tax liabilities? Here are a few suggestions:

1. Make sure you have the right business vehicle. I am not talking about modes of transport here, but the set up and status of the business. Limited companies still offer a lot more flexibility as to how and when to draw profits, not to mention the more favourable overall tax position at modest levels of profit. It doesn’t work for everyone, but when it works, it works very well.
2. For owner managed limited companies, make sure your profit extraction strategy is balanced correctly. I recently took over the accounting and tax advisor role for a company with profits just under £100,000 per annum, and by restructuring the strategy, the client saved just over £6,000 per annum. Needless to say, the client is a happy chappy!
3. The rules on capital allowances have changed quite a lot recently. This means that when you are planning on buying a fixed asset for use in the business, the tax implications need proper consideration. The timing of the expenditure is important, and in some cases (especially motor vehicles), a slight change in the specification of the asset can have substantial tax consequences.
4. Talking of motor vehicles, it is generally accepted that a company car is no longer an efficient ‘perk’ from a tax point of view. Even though fuel prices have increased substantially in recent years, it is generally more tax efficient to buy a car for business use in your own name, and to charge the business at approved rates. Again, it doesn’t work for everyone, but I have not come across a situation in the last two years when the company car route has been the best option for tax purposes.
5. Making the most use of tax allowances, such as the capital gains tax annual exemption, is just common sense. However, it is very hard for tax advisors to act after the transaction has been made. If you are planning for the disposal of an investment in the future, please contact your accountant or tax advisor before making the transaction, as early action may save a substantial sum of money.

These are just a few suggestions which can make a big difference. If any of these set alarm bells ringing, please contact your accountant or tax advisor. If they don’t know what you are talking about, then please contact us, and we will be happy to help - Coventry 024 7696 0710