3 Steps to reduce your Corporation Tax liability
Post Author:
Angie Harvey
Date Posted:
March 5, 2018
Share This:
Categories:
As the saying goes “Fail to plan – Plan to fail”
As your company year-end is on the horizon, planning should be up there with those “must do” tasks.
The 3 options below are good ways to reduce your company’s corporation tax liability, effectively keeping cash in the bank of the company rather than the tax man’s.
- Capital Expenditure
If the company has planned future capital expenditure, it may be worthwhile bringing the purchase forward to make use of the 100% annual investment allowance. The allowance allows businesses to purchase capital assets and claim 100% tax relief in the year of acquisition up to £200k. This means for example that an item of equipment costing £50k could save tax of £9,500. There are also additional reliefs for certain energy efficient assets. An example being cars which in most circumstances do not receive full allowance upon acquisition.
Assets purchased on hire purchase will still receive full allowances with the added benefit of obtaining tax relief on interest paid. (A good option if cash is not readily available).
- Pension contributions
Company contributions will attract tax relief to the company and create no personal tax charge on you as an individual. This is a very efficient way to extract profits from the company and help save for retirement. Generally, a company can contribute up to £40k per year, however there can be additional reliefs available, but also restrictions depending on personal circumstances.
- Bonuses
Companies considering paying employees/directors bonuses could benefit earlier than the date of payment (up to 9 months). Accrued bonuses are a good way to obtain tax relief early, however to be allowable, minutes should be written up before the year end acknowledging the bonuses due.
Before jumping into any of the above, forecasting should be carried out to establish potential tax liabilities that the company may still incur to ensure the company has the resource to meet any tax liability.
If you would like to discuss this in further, please contact us on 0131 317 7337 and you will be put through to one of our Corporate team members.
