Top ten tax tips for businesses
Alan Moore, tax partner at Clive Owen & Co LLP, shares his top ten tax tips for businesses in 2013.
1. Utilise your annual Capital Gains Tax allowance
If you have significant capital gains in your portfolio then it’s important to utilise the annual capital gains tax allowance. For the 2012/13 tax year this is worth £10,600 per person – one of the most generous annual allowances in the world.
2. Combined tax bill savings
For 2012/13 there are three rates of income tax – the basic rate of 20 per cent, the higher rate of 40 per cent and the additional rate of 50 per cent. By transferring income to a lower earning spouse or civil partner it’s possible to save tax at the higher rates thereby reducing the combined tax bill.
3. Time your dividend payments
Simply by timing the payment of dividends and bonuses from your own company you can save a considerable amount of tax or delay tax payments for up to a year. For example, Lisa runs her own company, Lisa Ltd. By paying a dividend on 6 April 2013 instead of 5 April 2013, she delays the payment of higher rate tax on this dividend by 12 months.
4. Dispensations for employers
You can save a considerable amount of time and money by applying to HMRC for a dispensation for certain business expenses reimbursed to employees by the company. It frees the employer from having to report certain expenses to HMRC and removes the need for the employee to claim the tax deduction, saving work all round.
5. Deduction for mileage payments
Under Approved Mileage Allowance Payments (AMAP) employers can pay staff tax-free mileage rates when they use their own car for business. But many employees don’t realise that if their employer pays them at a rate which is less than the approved rate ie less than 45p per mile for the first 10,000 miles, then they can claim a tax deduction for the shortfall.
6. Choose a low emission car
It’s possible to secure a 100 per cent tax deduction against profits for a car bought for your business by choosing a car with very low CO2 emissions. Emissions have to be 110g/km or less if the car is bought on or before March 31 2013 or 95g/km or less for those bought after April 1.
7. Self employed? Consider incorporation
Although the basic rate of income tax at 20 per cent is the same as the small profits rate of corporation tax (20 per cent in financial year 2012), it can still be beneficial to incorporate and extract funds by way of dividends as they do not attract National Insurance Contributions.
8. Claim expenses if you don’t fill in a tax return
If you do not fill in a tax return, you need to claim relief for expenses incurred in relation to your employment on form P87 as if you don’t claim the relief you’ll miss out. A claim for 2012/13 must be made by April 5 2017.
9. Commencement losses
Unrepresented taxpayers frequently miss out on an additional valuable tax relief – the availability of a three year carry back for losses incurred in the opening years of a trade.
10. Invest in an Enterprise Investment Scheme
EIS schemes offer tax relief on contributions at 30 per cent and a tax deferral on gains. EIS investments are generally high risk and invest in a single company.