Year End Planning for Sole Traders and Partnerships – Are you organised?

Year End – It’s that time of year again when you have to question whether you have utilised all the opportunities to minimise your tax burdens?

Manchester based accountants, Jack Ross would like to highlight a number of year end tax planning opportunities that could potentially assist your business make substantial tax savings.

Obviously some maybe appropriate for you as a Sole Trader / Partnership– others may not – but they are definitely worth a look!

Bringing Forward Costs

It may be worth considering bringing forward expenses that will reduce taxable profits. Perhaps you could consider bringing forward staff bonus/pension payments, review provisions against bad debts or accelerate “discretionary” expenditure such as building maintenance, advertising, purchasing business assets (see Capital Allowances below).

Capital Allowances

When assets are purchased for a business, such as machinery, office equipment or motor vehicles, capital allowances can be claimed which will go towards reducing a company’s taxable profits.

Capital allowances are given at different rates. The Annual Investment Allowance (AIA) is the most generous, providing a 100% write off on most types of plant and machinery, but not cars, on spend up to £500,000 per annum for a period of two years ending 31st December 2015. Thereafter the AIA drops to £25,000 per annum.

In addition to the AIA an enhanced 100% capital allowance is available on energy efficient plant and low emission cars.

Should you be think of purchasing business assets then consideration should be given to the timing of the purchase. You may also be considering purchasing or changing company cars, in which case thought needs to be given to how green the car is and the effect on capital allowances.

Consider the Business Structure

The current low rates of corporation tax have increased potential tax benefits of running a business through a limited company, instead of operating as a self-employed individual or partnership. The tax savings may be significant where an individual has business profits which fall within the 40% or 45% income tax bands.

If you would like to discuss incorporating your business call the Jack Ross Manchester accounts team on 0161 832 4451 or email info@jackross.co.uk.

 Consider the Accounting Year End

In certain circumstances it may be worth considering a change to business accounting year end. A new accounting year end may be more suitable to the business’ needs and may also enable overlap relief to be used from earlier years before inflation erodes its value.

New Tax Rules in Relation to Partnerships and LLPs

HM Revenue & Customs has introduced new tax rules in relation to some partnerships and LLPs which take effect from April 2014. The new rules are intended to counter perceived abuse by HMRC in relation to partnerships with individual and non-individual members (i.e. corporate members) and also LLPs with salaried partners.

If you would like to discuss the new tax rules in relation to your Partnership or LLP call the Jack Ross Manchester accounts team on 0161 832 4451 or email info@jackross.co.uk.

Pensions – Consider Maximising your Personal Pension Contributions

Although an individual’s pension contributions relate to the fiscal tax year, rather than the business accounting year, it is always worth considering the tax savings which can be made through making pension contributions.

The annual personal pension contribution limit for an individual is £40,000 for the year ending 5th April 2015. Any unused allowances from 2011/12, 2012/13 and 2013/14 are also available to be utilised in 2014/15.

For personal pension contributions, basic rate tax relief is given at source and higher or additional rate taxpayers can claim additional tax relief through their tax returns. The additional relief may be at 20% or 25% of the gross pension contribution, depending on your level of income.

As you can see, personal pension contributions provide a valuable source of tax relief.

You will appreciate it is impossible to cover the above points in detail or consider other tax planning opportunities in this short blog. Therefore, should you wish to discuss any of the above issues, please contact our Manchester accounting team to arrange a meeting or a telephone call on 0161 832 4451 or email info@jackross.co.uk.