Tax planning for a medium size business and its shareholders
One of our most recent cases has involved saving a medium sized local business substantial amounts of personal and corporate tax.
The personal tax savings were achieved by reviewing the company’s existing share structure. It became evident during the review that by altering the current share classes certain shareholders could be relived from paying higher rates of tax.
This was achieved by issuing a different type of share which, allowed the company’s profits to be distributed more tax efficiently.
It is important to give your share structure consideration as soon as you set up your business, having the wrong structure can cost you significant amounts of personal tax.
Whilst working with our client we were also able to make additional corporate tax savings by ensuring all available reliefs were claimed.
Firstly we applied the newly increased Annual investment allowance to the business’s newly purchased equipment, this meant 100% tax relief was claimed on all there new equipment purchases during the year.
Claiming the annual investment allowance can provide a business with a great cash flow advantage due to a reduced tax bill for the year which the equipment was purchased.
A further tax saving for this particular client was achieved by making a research and development claim.
A research and development claim is a very effective tax relief to claim but is often overlooked. Just by having a quick meeting and understanding a client’s business £1,000’s of tax can be saved.
By sitting down with our client we were able to identify exactly what they do and what areas of their expenditure related to research and development.
Once we had identified these areas we were able to submit a claim which allowed us to claim tax relief at 225%. This meant that for every £10,000 of expenditure we were able to claim back £4,500 worth of tax instead of the standard amount of £2,000. As a result of this we were able to save our client thousands of pounds.
Even after carrying out these tax savings for our client we continued to work and look into the future to develop further tax strategies to ensure their tax bills remained at the lowest possible level.
For this particular client this involved reviewing there company car policy and their plans for making pension contributions.
It is important to look at the whole picture when developing a tax strategies, one mistake can lead to significant amounts of unnecessary tax.