Enjoy these top tax tips for SMEs from Russell Cockburn, who is the author of Small Business Tax Planning, published in February 2011 by Harriman House.
Have you got the right business structure for you?
Many businesses operate as sole traders or partnerships. As your profits (hopefully) rise it will be well worth considering using a limited company as the tax and national insurance can be significant.
How are you paying yourself?
If you are already using a limited company it is important to get the best out of this structure by ensuring that you pay yourself in the most tax efficient manner. There are a number of alternatives including salary, dividends bonuses benefits in kind, loan interest and possibly also rents for your property. Optimising these alternatives can reduce your overall tax bill considerably
How are your assets held?
It is common to find business property assets held inside a balance sheet but this is not always the most tax effective solution and careful restructuring can sometime pay handsome dividends.
Involve as many taxpayers as you can.
Do you pay salary or dividends to a spouse or partner? Spreading profits around a number of taxpayers can reduce liabilities overall in some cases. Another option might be to add a company as a partner in your business so that some of your profits are taxed at the currently lower corporation tax rates available.
Review your borrowings both business and personal.
Personal borrowings cost you interest out of your taxed income. If you have both business and personal borrowings a restructuring strategy to optimise the relief available via your business might reduce your overall tax burden.
Check your capital allowances position.
Many businesses under claim on the tax reliefs available for purchases of plant and machinery, especially where these are fixed inside property assets. Having someone carry out a detailed review of present and past claims might even produce a refund of tax already paid
Be hot on compliance
It is easy to forget that the first stage in tax planning is to know how much you have to pay and when it will be payable. Having a reliable and comprehensive business record keeping system is an integral part of your tax planning process and will also ensure that your risks of inadvertently under declaring your tax liabilities are minimised.
Check what you can claim.
Tax law is quite specific about the available reliefs and deductions a business and its proprietors can claim but many people overlook the basics. There are a variety of reliefs and simple deductions on offer and used effectively these can eat away at your personal tax bills; for example are you claiming all the ?fixed rate deductions? and ?professional fees and expenses? to which you are entitled?
Optimise tax effective benefits for you and your staff.
The tax system provides a range of tax free or tax favoured benefits for staff. Ensuring they get the most out of thee regime will mean they pay less tax and feel better rewarded.
Buy the right company car/vehicle ? you can get 100% tax relief on some.
Cars are expensive but buying the right one with low emissions can get you a lower tax bill. Some vehicles even qualify for a 100% deduction against business taxable profits!
Russell Cockburn is the author of Small Business Tax Planning, published in February 2011 by Harriman House.