Top 10 tax tips for accountants to share with their clients
With the 31 July deadline for the second annual payment looming, Steve Deutsch, Chief Executive of Wesleyan Bank, outlines 10 tips that accountants can pass on to existing and prospective clients to enable them to reduce their tax bill and boost cash flow.
1. Review the business structure
Sole traders working from home should consider setting up a limited company to benefit from lower business rates. This would enable them to pay corporation tax, currently at 20% but which will drop to 17% by 2020, instead of income tax at 20% or 40% for higher rate taxpayers.
2. Operate from home
Self-employed businesses that spend time working from home can save tax by claiming for a proportion of a variety of home-related costs. These include council tax, insurance, mortgage interest, electricity and heating, water, landline and telephone bills.
3. Keep it in the family
Business owners can currently earn £11,100 of tax free income from assets. But by employing their spouse as a director or partner they can distribute the income depending on their personal allowances and transfer assets or gifts to family members which is tax-free.
4. Use finance to fund major investments
Businesses should consider using external finance providers when seeking funding for any major capital expenditure projects. Specialist lenders can secure competitive rates and manage each transaction meticulously from start to finish. Companies can also opt to lease the assets rather than signing up to a straight hire purchase deal. Although there is a cost to the debt, it is tax deductable which can offer short and long-term cash benefits.
5. Leverage the Annual Investment Allowance (AIA)
The AIA, set to £200,000 from April 2016, allows businesses to write off the costs of certain assets against profits in the year of purchase. This helps to bring quicker tax relief against capital expenditure. Most assets purchased for business use qualify including IT investments, office equipment and plant and machinery.
6. Consider the flat rate VAT scheme
This scheme allows businesses to benefit from a single, fixed rate of VAT and apply the percentage to their gross turnover during a quarter and pay this to HMRC. Rates vary depending on a business’s industry sector but can offer a welcome boost to cash flow.
7. Claim for expenses
Organisations can reduce their tax bill by claiming for various company expenditure such as business travel, (e.g. mileage), IT equipment and tea and coffee making facilities, which can be written off as a business expense.
8. Hire an accountant
Obviously. Although prospective clients may initially baulk at committing to additional costs, accountants can save businesses significant amounts of time and money by managing their financial affairs and alleviate the stress associated with paying tax bills.
9. Introduce tax-free benefits
Offering employee benefits can help to save tax for both a business and staff. Popular tax-free incentives include childcare vouchers, the Cycle to Work scheme which can save up to 25% of the cost of a new bike, workplace parking and meals in a staff canteen.
10. Plan ahead
Businesses should always plan ahead and set aside extra money when tax deadlines approach. But in the event of them being taken by surprise, organisations may wish to consider applying for short-term finance to cover the shortfall instead of having to delve into vital cash reserves.
Steve Deutsch comments: “Tax season is traditionally a stressful time for all organisations and the pressure on some business owners could intensify as HMRC scrutinise their financial activities more closely. As a result, an increasing number of SMEs are turning to tax funding as a simple and effective means to pay their tax bills without putting strain on their cash flow.
*According to research from UHY Hacker Young
About the author
Steve Deutsch is Chief Executive at Wesleyan Bank Ltd & Syscap Ltd. He has been a key member of the Wesleyan Group's Executive since 2005, undertaking a number of roles in that time across the Group including Operations Director, Commercial Director and COO - Sales. Since late 2012 he has been responsible for driving the growth of Wesleyan Bank, including the acquisition of Syscap in 2015. With near 30 years experience in Financial Services across a range of roles Steve leads a strong team who together are seeking to significantly develop and grow an already successful specialist business.
About the company
Wesleyan Bank offers an extensive range of solutions to enable businesses to spread the cost of their tax bills over six or 12 months, limiting the impact on their day-to-day finances so they can utilise working capital where they really need it.
This blog is one of a series of articles from our commercial partners.
The views expressed are those of the author and not necessarily those of ICAS.