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The end of the tax year cometh – plan ahead and save some tax!

 

Posted on 14 January 2016

It won’t be long before we get to the end of another tax year so now is the time to consider whether any basic planning points can benefit you. We have noted a handful of tips very briefly below, if you would like more detail on any of them please give us a call!

Business Taxes

  • Consider whether to accelerate dividend payments before the higher rate of dividend tax comes in on 6 April 2016
  • Ensure that family members utilise their personal allowances where they are employees, partners or shareholders in the business
  • Utilise any losses available
  • Unincorporated business owners should consider whether their profits have decreased in the current year and whether to reduce tax payments on account to ease cash flow
  • Keep your income below £100,000 where possible to avoid the “toxic rate of tax” where personal allowances are lost and the additional rate kicks in.
  • Make commercially reasonable pension contributions from your Company or consider personal contributions if you are self-employed.
  • Utilise the annual investment allowance to claim 100% deduction on permitted capital expenditure.
  • Ensure that your business structure is reviewed regularly so that it still meets your commercial requirements.  It may also need a review to ensure that income is taken efficiently, entrepreneur’s relief will be available on a future sale or that business property relief is available for inheritance tax purposes.
  • Review your payroll to ensure that you are taking advantage of employer allowances for NICS and that you are correctly dealing with any benefits your employees receive.

Visit link to view Tax planning for business 2016:

intranet/SiteAssets/SitePages/Home/Smith%20Cooper%20Business%20Tax%20Tips.pdf

Personal taxes

  • Utilise personal allowances – are assets shared sensibly between you and your spouse?
  • Review your salary and benefits package (including cars) to ensure that you are not paying too much tax on them
  • Use your pension allowances including unused allowances from previous years
  • Giving to charity is relievable at your highest rate of income tax and in some instances donations can be carried back to a previous tax year.  You can also give quoted shares or an interest in land to a charity in a tax efficient way
  • Check that your savings and investments are structured in a tax efficient way and that you use your ISA allowances and your annual capital gains tax allowance
  • Review your assets and Wills to ensure that inheritance tax planning is up to date
  • If you have family trusts ensure that they are still fit for purpose and that you plan cash flow for any capital taxes charges that might apply

Property taxes

  • New rules are coming that will have a big impact on buy to let landlords (interest relief restriction and additional stamp duty land tax) – consider how these will affect you and whether you should restructure your holdings
  • If you let furnished property consider deferring replacement of furnishings until after 6 April so that you can obtain tax relief on the new renewals basis
  • Record expenditure carefully so that relief can be claimed either against income or on the disposal of the property
  • Furnished holiday lettings are still able to benefit from more beneficial tax reliefs than other let property – ensure that you will qualify in order to claim capital allowances, loss reliefs and capital taxes reliefs where you can
  • Where high value residential property is owned by a Company (value around £500,000 or more), ensure that any ATED returns and reliefs have been considered and claimed
  • If you own more than one personal residence make sure that you have considered the principal private residence relief for capital gains tax and made the most beneficial elections within the time limits.  This could save large amounts of tax if one property is more likely to be sold

Employment Taxes

  • Make sure you are capturing all relevant information for P11D reporting
  • Consider whether you should set up a PAYE Settlement Agreement (PSA) with HMRC for minor benefits that the business wants to meet the tax liability on instead of putting then on P11D eg. staff entertaining, meals/awards
  • All dispensations are being revoked from 6 April 2016 so consider updating or introudcing expenses and benefits policies to evidence good corporate governance and control that manages tax risk. This will be the main focus of HMRC Employer and control that manages tax risk. This will be the main focus of HMRC Employer Compliance Inspections in future. An independent review can help you identify any weaknesses so that you can strengthen your position in event of a HMRC visit
  • Review the best rate of pay to ensure that the NMW rates are paid. National Living Wage rates of £7.20 for employees aged 25 and over come into place on 1 April 2016. A process needs to be in place to ensure when employees reach age 25 they are paid this. Errors are costly, and announced publically by HMRC.
  • Review all salary sacrifice arrangements to verify that the documentation evidences and communicates the contractual change - salary sacrifice must not take base salary below NMW/NLW
  • If you already payroll benefits, or are considering doing this, you need to apply to HMRC before 6 April 2016 to do this for 2016/17 tax year. Specialist advice is recommended before starting this voluntary arrangement 

VAT

  • Is VAT a cost to you or your business?  A VAT health check can highlight potential issues and identify opportunities to reduce VAT costs / increase the amount you can reclaim
  • If you are considering large capital expenditure on plant, commercial buildings or even renewable energy projects ensure that you seek advice at an early stage to make it VAT efficient

The list of tips is not an exhaustive one, if you think you could benefit from a second opinion on maximising your tax position before the end of the year we would like to hear from you.

Please view doucument for End of Year Tax Planning:

intranet/SiteAssets/SitePages/Home/Smith%20Cooper%20End%20of%20Year%20Tax%20Planning.pdf

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