Corporation tax planning and advice for limited companies; what does it involve?
The key strategy with companies regarding tax is not to look backwards.
You need to work at the taxes real time and the future, only then can you adapt the positioning to pay less tax and potential entitlement for tax reliefs.
Example One: Pensions
So a big silver bullet, at the moment with company tax, especially with SMEs, small and medium sized businesses, who are owner managed, is pensions.
So it is very, very effective for tax for both the individual and the company for your limited company to make pension contributions to directors.
For example, if you have a husband and wife business, you can take £40,000 out each a year through your company making pension contributions to your pensions; it gets the corporation tax relief and your joint pensions go up by £80,000.
The individual is not assessed on drawing that money out and it boosts your pension and the value of your pension.
Similarly with sole traders, if you as a sole trader invested in a pension and are a higher rate tax payer, you effectively get 42% tax relief.
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Example Two: Capital Expenditure
If you have to spend money on, for example, computer upgrades, or plant machinery you could decide to commit to the expenditure with the supplier before the year end and not just after the year, effectively getting tax relief 12 months sooner.
So is critically important to think real-time and in the future for tax planning for businesses.
Your skill as a business owner is to get new business and to do a really good job for all your clients, that’s why it’s very important to work with an accountant that knows the ways to protect the businesses cashflow and profits from HMRC.
It makes tax planning more effective and lets you as a business owner get on with running the business and earning more money.