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Six tax planning considerations for businesses

The Spring Budget announcement on 3 March provided businesses and individuals with more certainty when considering any tax planning opportunities ahead of the end of this tax year on 5 April. Some of the measures could also help as we look further into the future. So, what should you be considering? Mark Tibbert, of Thomas Westcott Chartered Accountants, has six areas to look at.

  1. Have you made full use of your pension allowances?

Every individual has an annual pension allowance of £40,000. If you are looking to reduce your company’s tax liability, remove or reduce a higher rate tax liability, or, for high earners, restore your personal allowance, then pension contributions should be considered.

  1. Are you planning capital expenditure on plant and equipment?

If so, then the decision for companies is now more complicated. If spend can be delayed until after 1 April 2021, it may delay the tax relief, but could mean obtaining an additional 30% tax deduction or the equivalent of a further 5.7% real tax saving.

  1. For company owners, have you declared dividends to make use of your available allowances this year?

Assuming the company has retained profits brought forward or available profits this year, have you:

  • Declared dividends to make use of the personal £2,000 dividend allowance?
    • Declared dividends to make full use of the individual earnings limit of £50,000 before paying tax at higher rates? This is relevant even if you do not intend to take the cash out of the company now.
  1. Can you carry back any losses?

In recognition of the difficult past 12 months, there is now scope for businesses to carry back losses by up to 36 months. Businesses should consider if this is a possibility to recover taxes already paid and give a much-needed cash injection. Alternatively, with the prospect of potential future tax rises, the losses may generate greater relief by being carried forward, given we already know corporate tax rates will increase to 25% from 1 April 2023.

  1. Will you benefit from the extended SDLT holiday?

The Spring Budget brought good news for residential property transactions. The Stamp Duty Land Tax (SDLT) holiday on properties less than £500,000 will remain until 1 July 2021 before being phased out. That means buyers have longer to complete purchases at the lower rate. From a planning perspective, there is now an extended window to look at transfers between spouses without incurring an SDLT liability where any debt is involved.

  1. How do the other measures impact on you and your business?

There are a number of other measures to support businesses and individuals impacted by the pandemic. It is worth considering which of these may help you over the coming months.

  • The extension of the furlough scheme until 30 September, 2021, with businesses only having to contribute more from July 2021.
  • A fourth and fifth round of support grant for the self-employed, including extending the scheme for those newly self-employed in 2019/20.
  • The extension of the VAT-reduced rate for hospitality until 30 September 2021 and then a new 12.5% rate through to 31 March 2022.
  • 100% Business Rates relief until 30 June 2021 for three months and then a reduced rate for the rest of the year.
  • Business restart grants will be made available, including up to £6,000 for non-essential retail businesses, £18,000 for hospitality, accommodation, leisure, personal care and gym businesses and discretionary grants for businesses that do not fall into these categories.

For further information on any of these measures, or to discuss how Thomas Westcott can help with any planning, please contact us at events@thomaswestcott.co.uk or call us on 01392 288555.

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