Tax Busting Health Check for Businesses 

By

Derek Williamson

FAIA, FFA, FIPA, CME


Introduction

Everyone dislikes paying tax, but in the end we all have to pay our share. However, there is absolutely no sense in paying more than you have to and there are numerous completely legal and legitimate means to reduce those dreaded tax bills.

This tax-busting health check is designed to cover all of the common (and a few obscure) ways of saving tax. Of course this is a checklist and you must seek professional advice before implementing any specific ideas.

We hope this health check identifies some new tax saving ideas for you. If it doesn’t, at least you can sleep safe in the knowledge that you are probably doing most of the right things to reduce those tax bills.

The checklist should take no more than 15 minutes to complete.

You can then either send it to us to review and we will give you a call to discuss, or you can arrange to come and meet with us in person to go through any areas where tax saving opportunities have possibly been identified.

Whilst every effort has been made to ensure the accuracy of this publication we cannot accept any liability for any errors or omissions contained herein, nor liability for any person acting or refraining from action as a result of information contained here. You must meet with us to discuss your personal circumstances.


Has Your Accountant mentioned this?

Business Planning

1

If your spouse earns less than the single person’s allowance of £10,000 per year (2014/15) and helps out in your business, you can pay them a wage to reduce your taxable profits.

Yes

No

N/A

2

If your children earn less than the single person’s allowance and help out in your business you can pay them a wage to reduce your taxable profits. This can have a big effect on your tax bill when the business ceases.

Yes

No

N/A

3

Have you considered the best date to have your accounting year end and are you fully aware of the effect of overlap relief by having this date?

Yes

No

N/A

4

Do you make sure you always have a pre-year end tax planning meeting with your accountant to make sure all necessary action is taken before your year end?  After then it will probably be too late.

Yes

No

N/A

5

If you are a sole trader paying 40% tax and your spouse helps out in the business but is a lower rate taxpayer, have you considered making your spouse a partner to allocate some profits to them at a lower rate of tax?

Yes

No

N/A

6

If you are a sole trader earning less than £5,885 per year (2014/15) there is no need to pay Class 2 national insurance.

Yes

No

N/A

7

Have you considered whether you have the right legal structure for your business? If you are a sole trader or partnership paying higher rate tax you should consider using a Limited Company. Have you also considered the new Limited Liability Partnership structure available from 6th April 2001?

Yes

No

N/A

8

Make sure you buy assets such as equipment, computers, motor vehicles etc at the right time so as to get tax relief as early as possible. Buying equipment just before rather than just after your year end can get you tax relief for capital allowances a year early.

Yes

No

N/A

9

If you have personal loans or are considering taking out a personal loan you may be able to arrange your finances so that these are business loans. By doing this you will get tax relief on the interest on the loan.

Yes

No

N/A

10

Is your business structured correctly so that when you finally come to sell it, the amount of Capital Gains Tax payable is reduced? This needs doing now, not when you come to sell. Don’t give away a large proportion of everything you have built up.

Yes

No

N/A

11

If your business has made a loss, make sure you have claimed relief for the loss by setting it off against previous or future profits or other income.

Yes

No

N/A

12

If you have previously been involved in a business in which you subscribed for shares and you lost money, you can, subject to a few conditions, claim tax relief for the loss by set off against profits from your trade.

Yes

No

N/A

13

Employees using VDUs are entitled to have the cost of eye tests and glasses for VDU use paid for by their employers.

Yes

No

N/A

14

If you work from home make sure you are claiming for ‘use of home as office’. Look to claim a proportion of items such as mortgage interest as well as gas, electricity, water rates etc.

Yes

No

N/A

15

Are you aware that Capital Gains Tax on business assets held for 2 years is now just 10% and for 1 year is just 20%, which means you should look to take advantage of these low rates?

Yes

No

N/A

Business planning, especially if you have a Limited Company

16

Make sure you extract money from your limited company in the most tax efficient way. Look at using dividends to avoid paying any employees or employers national insurance. Often the best route is a mixture of PAYE salary, dividends and benefits in kind.

Yes

No

N/A

17

Have you looked at the rate of Corporation Tax you are paying and taken all necessary steps to reduce this? Did you know that once your profits go above £300,000 the rate goes up to 21%?

Yes

No

N/A

18

If your Limited company works mainly for one customer for long periods of time, or you use the services of a Limited company like this, watch out for IR35 where you can become liable for national insurance and more on all the payments. Make sure you have taken the necessary steps to avoid IR35. Employees: remember that if you are a director of your own Ltd company that this includes you.

Yes

No

N/A

19

Have you got a staff suggestion scheme? This allows amounts to be paid tax free to your employees for suggestions they make, which are outside the scope of their normal duties.

Yes

No

N/A

20

Have you got any employees who have worked for you for more than 20 years? You can give them a long service award worth £50 for each year of service tax free in the form of a tangible article.

Yes

No

N/A

21

If your PAYE payments to the HM Revenue & Customs are less than £1,500 per month you can pay quarterly rather than monthly to help your cash flow.

Yes

No

N/A

22

If you have people who work mainly for you on a self-employed basis, are you sure they should be classified as self-employed?  Getting this wrong can cost a fortune. Make sure everything is put in place to increase your chances of HM Revenue & Customs agreeing self-employment.

Yes

No

N/A

23

Have you looked at making senior employees working for you a partner in the business? This can save lots of employer’s national insurance on their salary.

Yes

No

N/A

24

When you take on a new employee make sure you either get a P45 from them or get them to sign a P46. You will need this to ensure you can allocate some allowances to your employees. Without them you will be liable for any tax not correctly deducted.

Yes

No

N/A

25

If your employees subscribe to an approved professional organisation they can claim tax relief on the subscription.

Yes

No

N/A

Benefits in Kind

26

If you have a Limited company, have you considered whether cars used in the business are better owned personally by you or by the business? If you own the car personally you will not be taxed on a benefit in kind and can reclaim your mileage under the fixed profit car scheme. Which is best for you will depend on your car and various other factors, which your accountant should calculate.

Yes

No

N/A

27

If your employee receives less for fixed mileage allowances than the fixed profit car scheme allows, they can claim tax relief for the difference.

Yes

No

N/A

28

Make sure you complete all P11D’S for benefits in kind and expenses correctly and send them in on time. Failure to do so can result in a £3,000 fine per P11D.

Yes

No

N/A

29

Try to obtain a dispensation not to report certain expenses on your P11D’S to cut down on your administration.

Yes

No

N/A

30

Make sure all business mileage is recorded.

Yes

No

N/A

31

Have you reviewed your petrol situation, as benefits on the provision of petrol have recently risen significantly?

Yes

No

N/A

32

The following benefits can be paid to staff tax free: provision of mobile phones, use of a pool car, provision of workplace nurseries, relocation expenses and luncheon vouchers.

Yes

No

N/A

Personal Planning

33

By contributing to a personal pension you can get tax relief on your contributions. If you are a 40% taxpayer this means for every £100 you contribute your tax bill will reduce by £40.

Yes

No

N/A

34

Have you reviewed your pension situation since the 2009 budget, which significantly reduced the tax benefits on the income earned by pension schemes?

Yes

No

N/A

35

Do you have a will in place? Without one your estate may not go where you want it to go. Have you also considered the inheritance tax consequences of your death and ensure this has been reduced?

Yes

No

N/A

36

If you are ill or die what will happen to your business? Have you looked at Life Assurance, Critical Illness cover and Permanent Health Assurance and have you reviewed them recently?

Yes

No

N/A

37

If you want to leave gifts to your loved ones, have you considered making the gifts now? If you make gifts now and live 7 years they will not be liable to inheritance tax.

Yes

No

N/A

38

If you give to Charity have you arranged the gifts so that the Charity can reclaim a tax credit on the gift?

Yes

No

N/A

39

From April 2003, the Child Tax Credit has been introduced for families earning up to £58,000 per year, which you need to claim in order to receive it.

Yes

No

N/A

40

If you want to avoid tax by using offshore schemes you really need to look at emigrating for them to work.

Yes

No

N/A

Investments

41

Do you take advantage of investments where the income or growth on them is tax free? You should consider ISA’s and national savings.

Yes

No

N/A

42

Are your investments held between you and your spouse so as to reduce your tax? If you pay a higher rate of tax than your spouse you should consider transferring the investments to your spouse to reduce tax.

Yes

No

N/A

43

Do you make use of your Capital Gains annual exemption each year? If you have assets on which you have a gain you should consider disposing of them to make use of your annual exemption of £11,000. Otherwise your annual exemption is wasted and is lost forever.

Yes

No

N/A

44

If you are a non-taxpayer make sure you receive any bank or building society interest gross, without any tax deducted.

Yes

No

N/A

45

For a few investments you can actually get tax relief on the capital amount you invest. These include pensions, venture capital trusts, enterprise zone properties and use of the enterprise investment scheme.

Yes

No

N/A

46

If you invest in premium bonds all prizes are tax free. You normally get a reasonable rate of return and always have the chance of the big one. The lottery is not such a sound investment but again the prizes are tax free.

Yes

No

N/A

47

If you transfer any assets to your spouse no capital gains tax is payable on the transfer.

Yes

No

N/A

48

Have you taken advantage of all the Capital Gains tax exemptions available? Did you know that most of the Capital Gains Tax legislation is about exemptions rather than about what is taxable?

Yes

No

N/A

Property and loans

49

Have you looked at your mortgage provider to make sure you are getting a good deal? Often, thousands can be saved by switching providers.

Yes

No

N/A

50

If you are moving home have you looked at drawing funds out of your business and replacing them with a business loan rather than taking out a personal mortgage? With business loans you obtain full tax relief on the interest on the loan but you don’t with a personal mortgage.

Yes

No

N/A

51

If you are selling or buying a house watch out for the points at which stamp duty kicks in and increases. For example a house sold for £174,901 would have no stamp duty but a house sold for just £100 more would attract £1,750 of stamp duty. Look at reducing the price or allocating some of the proceeds to other items such as furniture. The other critical points are £250,000 and £500,000.

Yes

No

N/A

52

If you rent out a room in your house the first £4,250 of rental income you receive each year is free of tax.

Yes

No

N/A

53

If you rent out a furnished property you can claim 10% of the rent as an allowance for wear and tear on the furnishings.

Yes

No

N/A

54

If you are buying a property to rent out, it can often make sense to borrow the money even if you don’t need to, as you get tax relief on the loan interest. You may then have an alternative use for the money.

Yes

No

N/A

VAT

55

Make sure you register for VAT as soon as you should to avoid severe penalties. The registration limit is £81,000 of turnover per annum.

Yes

No

N/A

56

If you register for VAT you can still reclaim the VAT on various items purchased before you registered if they relate to sales that are made after registration. For example, stock for resale, computers etc.

Yes

No

N/A

57

If you receive any suppliers invoices after you have de-registered that relate to the sales before you de-registered you can reclaim the VAT on these.

Yes

No

N/A

58

If you reclaim business mileage by means of a fixed mileage allowance you can reclaim VAT on part of this allowance. The part of the allowance that relates to petrol (according to AA rates) can have VAT reclaimed on it.

Yes

No

N/A

59

You can claim back VAT on any debt that is more than 6 months old.

Yes

No

N/A

60

For businesses with a turnover of less than £150,000 per year you can use a new Flat Rate scheme for the calculation of VAT due, making the completion of VAT Returns far easier.

Yes

No

N/A

61

If your annual turnover is below £660,000 you can use the VAT cash accounting scheme so you only pay VAT when you receive payment from your customers rather than when you raise the sales invoice. This benefits cash flow.

Yes

No

N/A

Administration

62

If you want the Revenue to calculate your tax bill each year make sure you send it in before 30th September. If you are happy to calculate the tax but want to avoid a fine make sure it is in before the 31st January.

Yes

No

N/A

63

If your taxable income decreases so that your tax bill is going to decrease you can apply to lower your payments on account in January and July.

Yes

No

N/A

64

Make sure you pay your tax liabilities on time to avoid interest and further penalties.

Yes

No

N/A

65

If HM Customs & Excise make a mistake and forget to bill you for tax owed, and a lot later discover their mistake when you had been led to believe everything was up to date, you can ask for the tax to be waived under an extra statutory concession.

Yes

No

N/A

66

If you receive any queries from the HM Revenue & Customs or the DWP or they wish to visit you, make sure you ask your accountant about any questions you answer before doing so. Ask for any questions to be put in writing if you wish. A wrong answer can be a costly mistake.

Yes

No

N/A

67

The taxman makes mistakes. Do not be bullied into paying tax that is not due. We fight hard for our clients.

Yes

No

N/A


For further information about Goddards Accountants, please call us at our offices:

 

Brixton Office
		

		
c/o Technoestates
		
102 Acre Lane
		
Brixton
		
London
		
SW2 5QN
		
High Wycombe Office
		
		
c/o Franklin James
		
Axis 40, Oxford Road,
		
Stokenchurch,
		
High Wycombe
		
HP14 3SX
		
Croydon Office
		
		
c/o Technoestates
		
109 Church Street
		
Croydon
		
Surrey
		
CR0 1RN
		

		

		
Head Office
		
		
Spirit House
		
8 High Street
		
West Molesey
		
Surrey
		
KT8 2NA
		

		

Tel: 020 8941 2187

Email: info@goddards-accountants.co.uk

Website: www.cloudaccountingsurrey.co.uk

Tax Busting Health Check for Businesses.pdf