Partner Article

The election brings taxing questions

Although the General Election is just around the corner there’s still the opportunity for business leaders to consider how to take advantage of current tax reliefs before they potentially disappear after May 6.

Simon Warne, Tax Partner at Crowe Clark Whitehill, the national audit, tax and advisory firm with offices in Maidstone and Tunbridge Wells, believes business owners shouldn’t assume that today’s tax reliefs will still be available next year, as a new government could bring in swift change to the tax regime.

Businesses should ask themselves the following taxing questions:

Do you need to invest in new plant and machinery? Currently the first £500,000 of expenditure on plant and machinery attracts 100% tax relief. Designed to encourage investment, the scheme has been extended until 31 December 2015, but a new government could reduce this valuable business relief.

Are you able to make pension contributions? The idea of limiting tax relief on pension contributions to the basic rate has been raised by most political parties. With tax relief already restricted to the first £40,000 of pension contributions, it wouldn’t take much to take away higher or additional rate tax relief.

Are you planning to change your company car? Tax reliefs based on a vehicle’s CO2 emissions are being reduced year-on-year, but there are still 128 cars that qualify for 100% capital allowances. From 1 April this will be reduced to only 22 cars with low enough emissions to enable them to qualify. So, if you are thinking of changing a company car, you may want to check out those that still qualify as tax efficient.

Have you claimed your R&D tax credits? For every £100 invested in qualifying R&D activity a UK company can reclaim up to £32.63. This relief is being challenged by other EU nationals as being over-generous so may not continue at the same rate.

Did you know assets qualifying for Business Property Relief can be free of Inheritance Tax? This generous 100% could easily be the target of reform by a future government, possibly in the form of a claw back of the relief if the assets are sold soon after being passed on. As a result business owners may want to consider an early transfer of business assets in order to lock in the Inheritance Tax benefit, although potential Capital Gains Tax charges need to be considered.

Have you claimed relief against any losses? In the UK, businesses are restricted in terms of the time within which corporate losses can be carried forward, or used to limit the amount that can be used in subsequent years. Individuals in the UK are already restricted in the amount of tax deductions they can take – it would not be hard to do the same for companies, so take advice early and consider the options.

Is your business financed tax efficiently? UK companies currently get tax relief on the interest on borrowings used to acquire subsidiaries. This is a generous relief, especially now that most dividends received by UK companies are tax-free, and capital gains may be covered by reliefs. A deductible expense that isn’t matched by taxable income would be an obvious place to focus tax reform.

Are you fully benefiting from tax reliefs for entrepreneurs? Currently entrepreneurs can realise capital gains on their trading businesses at rates starting from 10%, or 28% if they don’t qualify for this rate. It might be wrong for individuals to assume that these rates will necessarily survive a change in government.

For more advice on tax and how the forthcoming election could impact your business, contact Simon Warne on 01622 767676 or email simon.warne@crowecw.co.uk.

This was posted in Bdaily's Members' News section by Maxim .