Spend a few minutes completing this tax-busting checklist and start cutting all your tax bills down to size!
From your personal pension to the benefits given to staff, there are numerous ways to reduce your tax bill. If you find that you’re answering no to more than one or two of the following questions, then you could be missing an opportunity to save:
1. Are you sure that you are taking money out of your business in the most tax-efficient way?
Tip: If your business is a limited company it often makes sense to get your money out by a combination of salary, dividends as well as other tax efficient strategies.
Yes No N/A
2. Are you paying your spouse a tax efficient salary?
Tip: The salary must be sensible and reflect the work done – and must actually be paid. HMRC forms may need to be completed and submitted especially if a state pension record is required.
Yes No N/A
3. Have you made the most of your opportunities to save tax by investing in a personal pension?
Tip: Subject to certain limits, pension contributions made personally are tax allowable – which means that the effective cost may be as little as 60p to invest £1 in a pension.
Yes No N/A
4. If you are a sole trader making losses or low profits have you considered whether to pay class 2 National Insurance Contributions?
Tip: If profits are below the small earnings exception (currently £5,075) then you can claim exception from paying class 2 National Insurance Contributions.
Yes No N/A
5. If you are about to invest in a new car, computer or any other business equipment, have you considered the best time to buy them and the best way to pay for them?
Tip: You can get 100% annual investment allowance of £100,000 (reducing to £25,000 in 2011/2012) on most plant and machinery. It’s also worth noting that you will get tax relief a lot quicker by making the investment shortly before rather than shortly after your business year-end.
Yes No N/A
6. If your business has made losses, have you made sure that those losses are being used to reduce your current tax bills by as much as possible?
Tip: If you are self employed it may be possible to set off the losses against your other income, or even against income from the previous year.
Tip: Companies making losses in accounting periods ending before 23 November 2010 will be able to carry the losses back up to three years, instead of the normal one year.
Yes No N/A
7. If you run a very profitable limited company, have you done everything possible to make sure that your profits are taxed at 21% or 28%, instead of 29.75%?
Tip: Companies with profits of up to £300,000 are taxed at 21%, from April 2010 while for profits of more than £1.5m the tax rate is 28% from April 2010. But for profits of between £300,001 and £1.5m, the tax rate effectively jumps up to a staggering 29.75% for the financial year to 31 March 2011.
Tip: You can’t usually get round this by setting up lots of companies in an attempt to keep them all paying the lowest rates of corporation tax, since there are “associated companies” rules designed to make that impossible. Professional advice should always be taken.
Tip: A review of expenses and how profits are taken out of the company can significantly reduce this tax bill.
Yes No N/A
8. In the last 12 months, have you considered whether your business would be better off trading as a sole trader, partnership, limited company or limited liability partnership?
Tip: The many changes announced in recent Budgets have moved the goalposts. For many businesses the scales may have tipped in favour of becoming a company, while for a few it may now be better to go back to being a sole trader or partnership. And since April 2001 limited liability partnerships may be better than either for some businesses.
Yes No N/A
9. Have you correctly recorded dividend payments by your company on board minutes and dividend vouchers?
Tip: HM Revenue & Customs may declare payments as loans or salary if proper paperwork is not in place for the dividend payments.
Yes No N/A
10. Have you planned ahead and taken action to minimise your tax bills when you eventually come to sell the business?
Tip: Do you really want the Taxman to take up to 50% of everything your business is worth? The amounts involved could be huge. But with proper planning at an early stage you should be able to keep much more of your money in your pocket… and not in the Taxman’s
Yes No N/A
11. If your sales are less than £1.35m a year, are you making VAT potentially much easier and cheaper for your business by making the most of the cash accounting scheme or the annual accounting scheme?
Tip: Many businesses find that annual VAT accounting saves them a lot of time, and cash accounting dramatically improves their cash flow. So, both are well worth exploring.
Yes No N/A
12. If you own any business property, have you maximised the capital allowances that you can claim?
Tip: It may be possible to get extra tax relief on the features within the business property, even if the property was bought many years ago. A detailed review of the business property can often result in significant tax savings, and in some cases significant tax refunds.
Yes No N/A
13. Have you considered the impact of Entrepreneur’s relief and Capital Gains Tax rules on selling your business and assets?
Tip: Selling assets rented to businesses will no longer automatically enjoy lower Capital Gains Tax treatment. The rules for Entrepreneur’s relief are complicated and care should be taken to plan the sale carefully to maximise tax savings.
Yes No N/A
These are just some of the questions we ask clients when planning their tax strategy – there’s many more that cover all shapes and sizes of businesses. If you’d like to discuss any of the points raised here, or to request a review of your current tax status, please email our dedicated Tax Team, or call 01245 495588
