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Companies Tax Planning ideas for the year end 5 April 2011

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16 March 2011

Whilst the Government is after every penny it can get to bolster public finances, you should review your tax position to ensure you are paying no more tax than you need to. These ideas are just a sample and are not covered in detail. To talk through your specific circumstances please speak to your usual Hazlewoods contact.

1. Consider your company car policy
With the ever increasing tax charges on company cars and fuel benefit it may be worth transferring company cars from the company to individuals personally. Whilst this may cause an increased tax charge at the time of transfer (if it is transferred at undervalue), it may be sensible planning overall.

2. Check the way you withdraw funds from the company is tax efficient
Significant tax could be saved by revisiting the way in which business owners withdraw funds. The basic choices are:

  • salary/bonus;
  • dividends;
  • interest on directors’ loan account balances; and 
  • rent

The most tax efficient solution is often a mixture of all four of these. To ensure tax is minimised the position should be reviewed annually. Any decision needs to consider all forms of tax, and also the interaction with pension planning.

3. If you have a company and it falls within IR35 and has deemed payments, change your year end to 5 April 2011

4. Check if you can benefit from the planned new ‘associated company’ rules
The Government is planning to introduce new associated company rules from 1 April 2011. The aim of this is to try and ensure that the associated company rules purely relate to whether companies are part of a wider economic unit rather than being potentially associated by ‘accident of circumstance’.
If you think your company may benefit from the new rules, and as a result you might pay the small companies rate of corporation tax rather than the marginal rate, you should consider:

  • bringing forward the year end date to take advantage of the new rules earlier (especially for husband and wife companies which are not inter-dependent).
  • paying a bonus during this year to obtain a tax deduction at the marginal rate rather than the small companies’ rate. 
  • reviewing whether any profit can be legitimately deferred until the new rules come in, if this reduces the overall tax charge.

5. Consider accruing bonuses
The company could accrue bonuses to directors and staff and then as long as they are paid within nine months of the end of the accounting period they will be tax deductible in that accounting period.

6. Consider introducing childcare vouchers
The rules are changing, so if you haven’t already got a scheme you should consider setting one up before 6 April 2011.

7. Pay tax and file returns on time to avoid penalties, surcharges and interest
From 1 April 2011 HMRC are getting rid of the concession which allows companies to file their corporation tax returns up to seven days late without suffering a penalty. Combined with the new penalty regime this makes it more important than ever to pay tax and file returns on time.

8. Maximise your capital allowance claims
The rates of capital allowances are reducing from 1 April 2012 as follows:

  • Writing down allowances reducing from 20% to 18% per annum in the general capital allowances pool;
  • The special rate pool allowances are reducing from 10% to 8% per annum; and
  • The annual investment allowance is reducing from £100,000 per annum to £25,000 per annum.

The pre-announcement of these changes will allow a certain amount of planning to maximise claims. 

9. If you’re planning a reorganisation check whether the proposed changes to the degrouping charge rules will impact

10. Check your record keeping
HMRC are becoming more targeted in their approach to tackling tax avoidance and evasion and good record keeping is essential. If you realise you have made an error speak to your usual Hazlewoods contact, as it could be worth taking advantage of one of the available disclosure opportunities.