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Here are my top 10 tax tips for companies:
1. Annual Investment Allowance – use it or lose it
The current Annual Investment Allowance (AIA) of £500,000 relates to expenditure on plant and machinery and applies to accounting periods between 1 April 2014 and 31 December 2015. When looking to maximise this relief seek advice on timing and accounting periods.
2. Maximise your allowances on commercial property before it is too late
It is still possible to retrospectively review the capital allowances claimed on the purchase of second hand commercial property, as often the previous owner may not have claimed. From 1 April 2012, the buyer and seller must agree the value allocated to capital allowances within 2 years of the sale. Claims cannot be made on such property acquired after 1 April 2014 unless the seller had already “pooled” its expenditure.
3. Not Just For Men in White Coats
Research & Development (R&D) Tax Relief is an extremely generous Corporation Tax relief that too many companies are missing out on. If your company operates in a high-tech environment and seeks to resolve technological challenges then this relief may be available to you. Don’t miss out.
4. What’s In the Box?
Companies that receive income from patents and are profitable will be able to claim the new Patent Box tax relief which, once fully phased in, will equate to an effective Corporation tax rate of only 10%.
5. Flat rate of Corporation Tax – beware of a pitfall
1 April 2015 sees a flat rate of Corporation Tax of 20%. Marginal relief and the effective marginal rate will be a thing of the past. Just beware of setting up too many unnecessary group companies though as the associated company rules will still apply in group scenarios and may lead to being dragged into the Payments On Account regime.
6. As easy as A,B,C
Want to pay dividends in a different proportion to the issued shares? Dividend waivers can be messy, complex and lead to problems. Solve this using alphabet shares.
7. Retention of key employees
Enterprise Management Incentive (EMI) share options are a very tax efficient mechanism to retain key employees without actually giving up any shares. Often the option can only be exercised on an exit (sale or liquidation) which encourages employee retention and they share in the ultimate success of the company.
8. Overdrawn Loan Accounts
The 2013 budget saw anti-avoidance rules in respect of avoiding the overdrawn loan account tax charge by “bed and breakfasting”, i.e. clearing the loan just prior to the tax being due then going overdrawn again shortly afterwards. Loans cleared by dividend or bonus are not caught by these new rules. The further proposed changes to the regime have been shelved for the time being.
9. Structure fit for purpose?
Does your corporate structure meet your needs? Is there a minority shareholder you want bought out? Are you looking to sell all or part of the business in the future? What is your exit strategy? We can ensure your corporate structure reflects the answers to these questions.
10. Had enough? How to get out
For smaller companies, there is now a limited opportunity to discorporate (i.e. become a sole trader or partnership) without incurring a corporation tax charge (a personal tax charge may still apply). This relief only applies on land or goodwill up to £100,000 and is only available for a few years.
Of course, the information given above is merely an overview of some complex but generous tax planning that is available to companies and you should seek specific guidance in respect of your own circumstances before proceeding.
Nigel Holmes, Partner
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