Lite Tax Accountancy Services
Using the tax system for our advantage.
There are a number of instances where we find our accounts clients are paying too much tax. We must also be mindful that the inaccurate or late submission of returns can lead to fines or surcharges.
With careful planning most organisations are able to save considerable amounts of tax. Here are some examples:
When starting a new business, it is important that it is setup correctly and that the structure is right from a business and tax perspective. We can assist you with the correct registration, structure and advice as well as doing your accounts. Authorities are quite strict that new businesses adhere to deadlines. They can and often will impose fines for non-compliance. We aim to make the business registration an easy process for you.
Previous to the 5th April 2016 incorporation was “a must” for most small businesses from the point of view of tax planning. Government has attempted to “level the playing field” between Sole Trader and Limited Company in terms of Taxation.
The level of owner asset protection, the tax savings still to be made and the flexibility in tax planning will usually make incorporation the better option.
For most organisations the VAT return is a quarterly bugbear that has to be done. It’s complicated, time consuming, you are acting as an unpaid tax collector for HMRC and can cost you dearly if its late or incorrect.
It may be time to re-consider the vat return. Even here there are opportunities to save tax. The first question we must ask is whether it is worth registering for VAT? In general, if your organisation’s turnover is less than £83,000 and you sell to the General Public it probably will not be. If however you work for VAT registered businesses there is likely to be an advantage in claiming back the vat on your purchases.
There are other choices :-
A flat rated system, which often saves many of our customers thousands of pounds per year and a huge amount of time may be appropriate for your organisation as well.
Paying VAT on invoices that have not yet been settled are a drain on the working capital of an organisation. It may be appropriate to adopt the cash system of VAT calculation.
Or let’s go the whole hog and use both together! That is about as close as we can get to making VAT sexy!
Personal Tax Returns
The UK tax authorities run a self-assessment system for tax returns. There are so many ways that your tax bill can be mitigated.
One of the first things to ask is whether all of the relevant costs are being reclaimed? Any relevant business cost can be offset against tax. This seems obvious but it is amazing the number of times we see costs under claimed.
For Husband and Wife teams we should aim to utilise all of the lower or zero rate bands available.
The timing of profit streams and dividend payments can have a huge impact on the timing of your tax payments.
Corporation Tax Returns
The small to medium sized companies that we specialise in dealing with have a cash-flow advantage over sole traders and partnerships as they do not need to make the dreaded payments on account. The basic corporation tax rate is 20 % (soon to be 19%) and if the cash is left in the company there is no more to pay.
Tax is payable when cash is taken from the company and the four main ways of extracting cash from a corporation are :-
Salary – We need to make sure you are utilising the tax free band.
Mileage – You can claim your business mileage from the company. This includes incidentals such as trips to the bank, stationers and even to your accountant.
Rent – You are able to charge a proportion of your “home running costs” rather than a nominal fee as a sole trader.
Dividends – Not as tax efficient as before but definitely explore this route before most others.
There is not much we can say about payroll, except don’t get it wrong as it is costly. This is also the case for Pension auto-enrolment.
In the past we managed to make each client £825 for submitting their P60 tax returns electronically. HMRC are not quite as generous as they used to be these days and seem to prefer the “carrot to the stick”, but we are always searching for similar opportunities.