Wealth Management news

As we approach the tax year end on 5 April 2022, we thought it would be useful to provide an outline of a few things you could consider before your accounting year end.

We do not recommend spending money just to save tax! You need to time what you would do commercially any way in order to get the most out of the tax system.

You could consider making your spouse either a partner or shareholder in the business, although if they are a shareholder, make sure they own at least 5% of the voting rights in the company and are either an officer or director to protect valuable entrepreneur’s relief on any eventual exit from the business.

Salaries/Pensions for Employees
If any bonuses are to be paid in relation to the accounting year, ensure they are declared by the end of the year and paid within 9 months.

Where possible pay your spouse and teenage children a wage for the work that they do for you, but ensure that it is actually paid to them and that it is reasonable for the work they do.

If you employ other staff members and have a payroll scheme set up then paying your wife and children will mean that you will have to add them to the payroll and report the payments under RTI even if you pay them below these limits.

Overhead Expenses
If any expenditure, which will be incurred anyway, can justifiably be brought forward to just before the year end then do so. For example, if any machinery is in need of repair, get it done before the accounting year end to ensure that you can claim tax relief on the cost of the repair.

Bad Debts
Ensure a specific provision is made for any bad debts outstanding at the year end.

Asset Purchases
If you need to purchase any assets, please ensure you have an invoice dated before your year end and that the assets purchased are paid for within four months of the year end.

Ensure that any new assets are purchased (this can be on finance) rather than leased as leases are less tax efficient.

The Annual Investment Allowance is currently £1 million per year, which is set to continue until the end of March 2023. If you are considering spending in excess of £1 million then it would be worth considering purchasing items that qualify for 100% Enhanced Capital Allowances. There are currently over 16,000 products eligible for relief and include such things as:

  • Heat pumps
  • Solar thermal systems
  • Refrigeration equipment
  • Pipework insulation

If you would like us to check if the products you want to buy are on the list, then please let us know.

Some capital purchases would be entitled to a ‘super deduction’ capital allowance at a rate of 130%. Please contact us if you require any further information regarding this. If you are purchasing equipment using hire purchase, then make sure the agreement is signed before the year end and the equipment is delivered before the year end, thus enabling you to claim full capital allowances.

Assets Sales
Where possible any asset sales should be just after your accounting year end. If any sales are likely, confirm the tax written down value with us before the invoicing is done, to avoid any unexpected tax charges. If any leased assets are sold, get the trade in value reduced.

Ensure any repair work is started before the year end. If you cannot get the work completed by the year end, we recommend you ensure you have a quote for the work dated before your year end, which may enable us to include it as a specific provision in your accounts and claim the tax relief a year earlier.

We advise you obtain documentation for any refurbishment work to buildings, correctly showing the split between repairs and new work separately.

If you would like to discuss this further please do not hesitate to contact us. You can call us on 01823 218550 or email enquiry@caa-ltd.com and we will get back to you as soon as possible.

The content of this newsletter is for general information only and does not constitute tax advice.
It should not be relied upon and action which could affect your business should not be taken without appropriate professional advice.