As the end of the tax year approaches, it’s a great time to consider if there are any opportunities to benefit from tax relief. Here are HB’s top tax tips for businesses for the year end – if you want to know more, give the tax team at HB Accountant a call.
Corporation Tax
Corporation tax is currently 19%, hence a business making a clear £100,000 profit will pay £19,000 in corporation tax.
HB’s Top Tax Tips to Reduce Corporation Tax
Allowable Deductions & Expenses
Claim every allowable deduction and expense so you only pay tax on your true profit. Remember, if you’re a limited company, costs must be made ‘wholly and exclusively’ for the business to be allowable. Consider those listed below as an example.
- Pension contributions – these must be made by year end to claim tax relief
- Business insurance
- Subscriptions and professional membership
- Staff entertaining (up to £150 per employee per annum)
- Training
Smaller Expenses
Remember smaller expenses too. It may seem like a hassle to record the mileage for a short business trip or input a receipt for pens and paper, but over the course of a year those small items add up. Just remember the “wholly and exclusively” rule: anything you claim must be entirely for business use.
Equipment, Technology or Premises
If you’re in need of a large piece of equipment, technology, or new premises, take advantage of the Government’s Annual Investment Allowance. Businesses can claim 100% allowances on investments in “Plant and Machinery” (things like commercial vehicles, building fixtures and office equipment) for tax purposes. The allowance is set to temporarily increase to £1 million between 1st January 2019 and 31st December 2020. (We have a budget looming, so this allowance may change).
Extension to First Year Allowance for electric charging points
The government provides a 100% first year allowance for expenditure incurred on electric vehicle charge point equipment. This was due to expire in 2019. This First year Allowance has been extended for a further four years to 2023:
- Extension up to 31 March 2023 for corporation tax purposes
- Extension up to 5 April 2023 for income tax purposes.
Read more on Capital Allowances here
Expenditure incurred on or after 1 April 2019 until 31 March 2023 for corporation tax purposes and on or after 6 April 2019 until 5 April 2023 for income tax purposes will now be eligible for this tax relief.
Early Payment to HMRC
Surprise HMRC with an early payment. If you stay on top of your tax affairs and are able to pay your Corporation Tax bill early, HMRC will actually give you some of it back in the form of interest.
Extracting Profits
Are you extracting profits in the most tax-efficient manner? Speak to your accountant for guidance. Remember that any Directors’ bonuses must be paid within 9 months of the year end.
Salary Paid to Family Members
Salary paid to family members is deductible as long as it’s justifiable and at a commercial rate.
Potential Tax Changes for Consideration
Be aware that the corporation tax level for 2020/2021 may be reduced to 17% as per current legislation, however the Government announced during the recent election that this reduction will be put on hold, but as of yet, this has not been written into statute.
For specific advice about corporation tax or VAT, talk to a tax expert as every business and every situation is different. There may be allowances or deductions for your specific industry. For great advice, contact Amy amy@hbaccountants.co.uk in our tax department who can help you.
Click here for more information from HMRC or call Amy our Tax Manager on 01992 444466
