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Tax planning opportunities for business owners prior to 5th April 2012

February 2, 2012

The end of the 2011-12 tax year is fast approaching – 5 April 2012. In this article, we look at some of the issues that you may like to consider while there is still time to act.

Investing in new or second hand equipment

If you make a purchase of qualifying equipment before 6 April 2012 you should be able to write off 100% of the cost against your profit for 2011-12. The current limit is £100,000. The bad news is that from 6 April 2012 this £100,000 limit is being reduced to just £25,000. (There are complications if your trading year end straddles the tax year end. In this case the amount of tax relief you can claim may be reduced.)

Accordingly if you are contemplating a significant equipment purchase it would be worth your while to see if savings in tax can be made if you purchase before 6 April 2012.

Employees provided with private fuel

If you have company car users and the company pays for business and private fuel, both the company and the employee will suffer a tax charge. These charges can be eliminated entirely if the employee refunds the private element to the employer. The simplest way to do this is provide a log of private mileage and multiply this by HMRC approved fuel rates.

Annual tax allowances – capital gains tax

You are entitled to tax free gains up to £10,600 during 2011-12. If you have made no chargeable disposals so far this tax year you have until 5 April 2012 to take advantage of this allowance. If you don’t use it, it will be lost. Take a look at your share portfolio and see if you are sitting on any gains that you would be willing to realise. Take care not to buy back shares disposed of as they will likely be caught under the ‘Bed & Breakfast’ rules.

Annual gift allowance – inheritance tax

Have you taken advantage of the £3,000 annual gift allowance? And last year’s if not utilised?

Dividends

If you take regular dividends from your company you may want to consider the timing of the dividends you receive in March and April 2012. Dividends voted and paid on or before 5 April 2012 will be taxed in 2011-12, dividends voted and paid on 6 April 2012, a day later, will form part of your income for 2012-13.

Everyone’s circumstances will be different but this is a planning exercise that is well worth thinking about. This should enable you to see if you can achieve an overall reduction in tax, or second best, be able to defer tax payments due for a year.

This article was kindly provided by HFM Tax.