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 Budget 2009 for introduction over the next few years. Top earners will see income tax rise to 50%, their personal allowances taken away and their tax relief on pension contributions slashed in half. VAT will climb back to 17.5% and corporation tax is likely to go up for small companies as originally planned before the financial crisis set-in. Everyone across the board will have to pay more in national insurance as the NIC rates increase. It's quite some time since we have seen tax at these levels in the UK but the public finances have never before been so difficult.
Whoever is Chancellor in the coming years is going to face the same dilemma, so these tax changes unfortunately are not going to be reversed 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.