Final Chance For The Best Tax Relief When Buying Machinery

Posted on 13 February 2012 by paula

And a few other assets…….

April 2012 sees the end of 100% capital allowances tax relief for annual spend up to £100,000.

What am I talking about?

This is the amount your business can spend on plant and machinery and receive 100% of tax relief in the same year. Normally, the tax relief is spread over about 15 years!

For March 2012 year ends, if your profits are £200,000 and you spend £100,000 on a new machine, your corporation tax bill is reduced from £40,000 to £20,000.  After April 2012, this will be reduced to £25,000 plus 20% of £75,000 = £8,000.

If you enter into a contract to buy the machinery before April 2012, you can therefore achieve an extra £12,000 of cash flow to help grow your business.

You don’t even need to have the cash leaving your bank account before April 2012.

There are important transitional rules when your year end isn’t March, but the basic point remains that it is likely to be better to enter a contract before March 2012.

Do contact us if you think you might benefit from acting on this tax relief before it goes.

 

 

 

 

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Posted in Business Tax, Capital Allowances, Corporation Tax | Leave a comment

#Tax Myth 4 – Submitting my tax return early, means I pay my tax earlier

Posted on 2 February 2012 by paula

Now we’ve just finished the usual flurry of last minute income tax returns, it’s a good time to remind ourselves why we should submit our income tax and corporation tax returns early.

When I suggest this to people, about a quarter of them query it as a bad idea because it means the tax is due earlier.

This isn’t true for any tax payments. Tax due dates are fixed according to accounts and tax year ends.

What submitting your tax returns early does is provide more certainty about whether HMRC might have a query about your accounts, tax calculation and tax return.

A time limit starts from the day you submit your return. HMRC have to raise their enquiries within 12 months of the date your return is submitted.

If you hear nothing you can be reasonably comfortable there isn’t anything they want to ask you for that year.

It doesn’t provide 100% certainty because if they find an issue in a subsequent year. HMRC are able to revisit earlier years, but it does provide some comfort.

And to be near-to or late in filing your accounts and tax return is likely to be a factor for HMRC when considering who to open enquiries into.

Even if there is still an enquiry and an adjustment is agreed with HMRC, you have nipped the issue in the bud so there will be fewer months or years in which you might have repeated the error.

Many years of experience in accounts and tax has shown me that having the space and time to prepare figures without an immediate deadline, means more time to get clarification on potential issues, a more accurate return and a better service for you.

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#Tax Myth 3 – Tax Avoidance Is Illegal

Posted on 24 January 2012 by paula

When there was a window tax paid according to the number of windows in a building, property owners blocked out some windows with the sole purpose of paying less tax.

Was this tax avoidance? Yes

Was this illegal? No

Some property owners may have lied about the numbers of windows on their property with the sole purpose of paying less tax.

Was this tax evasion? Yes

Was this illegal? Yes

If you apply this analogy to today’s discussions on tax avoidance you can see why it is perfectly legal to organise your business and personal life in a way that means you pay no more tax than you should do.

When windows were blocked out there was a real event and a real consequence to that action; less light, more wall, rooms reconfigured. There was a practical limit as to how far you could go. A property with no windows wouldn’t have been attractive for any tenant to rent or for resale.

What is not legal is to lie. This includes not declaring income in your accounts or on your tax return.

Under declaration of income has been the subject of numerous HMRC cases over the years some of them deliberately concerned high profile people, the latest under scrutiny being Harry Redknapp.

We may not like Vodafone et al paying low rates of corporation tax but they are simply following the rules. I think we can be pretty sure they declare all their income. So, are we suggesting they aren’t allowed to ‘block up some windows’?

Of course there are grey areas, such as, for Vodafone et al, what is the amount of profit applicable to each part of the supply chain and therefore which part is the UK’s taxable profit or, say, Ireland’s? These figures are documented and reviewed at great length and there are probably about 100 correct answers. Perhaps this still needs more scrutiny. But let’s be clear what we are talking about.

If a fast food place doesn’t declare some cash takings or a high profile wealthy person doesn’t declare some cash, that’s ’not reporting the correct number of windows’. And is illegal.

 

 

 

 

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