Strategic Tax Planning

Tax is going to become an even more important issue for people running their own business because of the raft of tax changes announced in recent years. Top earners have seen income tax rise to 50%, their personal allowances taken away and their tax relief on pension contributions slashed. VAT now has a standard rate of 20%. The only good news is that corporation tax rates are falling, but these are being funded by a general reduction in the capital allowances which can be deducted. All but the lower paid will have to pay more in national insurance as the NIC rates increase across the board. The lower paid will also see a generous increase in their personal allowance, but this benefit is being deliberately denied to the better off by changes to the threshold at which 40% tax is paid. On top of this, the main rate for capital gains tax has seen a hike to 28%. It's quite some time since we have seen tax at these levels in the UK.

With the public finances in an unprecedented deficit the Chancellor is unfortunately not going to be able to reverse these tax changes in the short term.

People running their own business need to respond by developing a strategic tax plan so that, where possible, they avoid the worst impacts of these tax increases. A bespoke solution needs to be developed which complements the needs and ambitions of your particular business and your personal and family aspirations. With good advice and guidance, you and your business should emerge stronger and better off financially if you adopt a strategic tax plan.

Business owners need to look critically at all aspects of the way they operate. Ask yourself:

• Are you making use of all the available tax breaks including the temporary increases in capital allowances?
• Can your business attract tax efficient investment?
• Are you utilising all available tax shelters to manage downwards the corporation tax bill and stay outside quarterly payments?
• What are the tax efficient ways in which staff can be paid to lower what is often the main expense in a business - the wages bill?
• Would a reorganisation of your structure enhance your position by allowing you to reduce legitimately your effective tax rate when extracting profits?
• How do you ensure that you are best placed to maximise entrepreneurs' relief at 10% on a disposal?

Most people in business know just two things about Corporate Tax in the UK - its too hard & its too high. Harwood Hutton, with its new tax partner, Cormac Marum, with more than 25 years experience in tax, can help you to meet these challenges and ensure you have the right solutions to get to grips with tax and lessen its impact.