Three ideas to consider before your business tax year end (2010-11).
1. Accelerating revenue and capital expenditure
If you are considering significant revenue expenditure, redecorating your office, repairing plant or other equipment; or capital expenditure, buying commercial vehicles, computers or plant – you may want to consider the timing of the expenditure. Expenditure that impacts your profits before the end of the current tax year (5 April 2011 for the self-employed and 1 April 2011 for companies) will reduce your tax payments for the 2010-11 year. If you delay the payments, so they reduce your tax for 2011-12, your tax relief on the expenditure will be delayed by 12 months. For example, if your accounts year end is 31 March 2011 and you are committing to the purchase of a new computer system in April 2011, by bringing forwards the expenditure to March 2011, just one month, you could get tax relief 12 months earlier.
2. Directors’ pension contributions
In April 2011 the rules for tax relief on pension contributions are changing significantly. The annual limit on contributions allowable is dropping from £255,000 to £50,000. Take advice now to see if there is scope to top up directors’ contributions before 31 March 2011.
3. Directors’ bonuses
As long as the commitment to pay directors’ bonuses is correctly minuted prior to the end of the accounting year, and any tax and NIC deducted from the bonus is paid to HMRC within 9 months of the accounting year end, then there should be no problem in securing tax relief. It is acceptable to hold a board meeting at which the liability to pay a bonus is crystallised by a decision, but the amount of the bonus is left undetermined until the accounts are finalised. In this way, the bonus will be tax deductible in the year to which it relates rather than the later year in which it is paid.
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