YEAR END TAX PLANNING IDEAS FOR YOUR BUSINESS

 

It is always a good idea to set up a planning meeting with us a couple of months before your business year end so that we can advise you on the best actions to take to reduce your taxable profits. In addition to considering paying yourself a bonus from your company you might consider:

 

  • Bringing forward expenditure on equipment to take advantage of the 100% annual investment allowance (AIA) – up to £1 million a year on new and used equipment;
  • For limited companies, most new equipment qualifies for unlimited “full expensing” relief;
  • Where equipment is bought on hire purchase, make sure that it is brought into use by the year end to get tax relief on the full purchase price; and
  • Making additional pension contributions, taking advantage of the new £60,000 annual input allowance.

 

PLANNING A STAFF CHRISTMAS PARTY?

 

Employers may meet the cost of certain social events for staff without creating a tax liability. This used to be a concession but is now a statutory exemption provided certain conditions apply.

 

The exemption applies to an “annual party or similar function” provided it is available to all employees or available generally to those at a particular location. During the Covid-19 pandemic HMRC confirmed that a ‘function’ could include a virtual party, where employers were unable to host a traditional party at which employees would have been physically present.

 

A key condition is that the cost per head of the party or function must not exceed £150, inclusive of VAT. If an event costs more than £150 then it is taxable in full, not just on the excess over £150.

 

If you have already held a summer event for staff it may be possible have another event, and for that to also be exempt from tax, provided the combined cost per head is no more than £150 a year. If the combined cost exceeds £150 for the year the employer can designate which ones should be taken into account to make best use of the exemption. If, for example, the cost per head of the Christmas party was £100, and the Summer event was £70 the employer can nominate the Christmas party to be covered by the exemption, but the £70 Summer Event would be taxable in full (not just the excess £20).

 

Rather than the employee being taxed on the £70 the employer can deal with the tax and national insurance on the employees’ behalf by way of a PAYE settlement agreement.

 

CHRISTMAS GIFTS – TAX DEDUCTIBLE?

 

Employers may provide Christmas gifts to their staff, in addition to a Christmas party, which can be treated as trivial benefits as long they fall within the rules of:

  • Value of £50 or less
  • Must not be in cash or a voucher that is convertible into cash
  • Must not be related to work performance in any way
  • If director, must not exceed annual limit of £300

 

CHARGING ELECTRIC CARS AT HOME

 

HMRC have recently clarified their view of the tax treatment of the reimbursement of electricity costs where employees charge their electric company cars at home. HMRC now accepts that reimbursing part of a domestic energy bill, which is used to charge a company car or van, is exempt from income tax. Their previous view was that such reimbursements were taxable.

 

Note that the exemption will only apply provided it can be demonstrated that the electricity was used to charge the company car or van, which may be difficult to determine in practice. Employers will need to make sure that any reimbursement made towards the cost of electricity relates solely to the charging of their company car or van.

 

It should be remembered that where the employee uses workplace charging facilities there is no taxable benefit.

 

It should be noted that HMRC have still not revised their view on reclaiming VAT in respect of business miles driven by an employee who has changed their car at home. Regardless of whether the vehicle is a company car or the employee’s own, the employer cannot reclaim the VAT because the supply of electricity is made to the employee, not the employer.

 

CONSIDERING A NEW RESEARCH & DEVELOPMENT TAX CREDIT CLAIM?

 

Are you thinking about potentially claiming research & development tax credits and haven’t done so during the previous three accounting periods?

 

One of the new criteria introduced by HMRC is that you have to advise them that you are thinking of making a claim within 6 months of your year end. You will still have the normal time frames to complete and make the claim, but if they haven’t received the notification that you wish to do this within 6 months of your year end, it will be refused.

 

Therefore, we recommend that if this even a vague consideration for you, to discuss it with us as soon as possible in order that the necessary steps can be taken. If you do advise them, but then decide not to put the claim in, there is no negative impact of this.

 

HMRC CHALLENGES LLP SCHEME FOR PROPERTY BUSINESSES

 

HMRC have recently published Spotlight 63 which alerts taxpayers to a marketed tax avoidance scheme that claims to help taxpayers reduce the tax payable on their property rental profits.

 

The HMRC view is that the “hybrid” structure involving an LLP with individual and corporate members does not have the tax savings that the scheme promoters claim.

 

The scheme claims to enable buy to let landlords to transfer properties to the structure without paying capital gains tax (CGT) or stamp duty land tax (SDLT) and, once established, obtain a bigger deduction for their mortgage interest payments than they would have obtained if the property had remained in individual ownership.

It is also claimed that the “hybrid” structure saves inheritance tax when the property is passed on, which is incorrect as there is no IHT business relief for property investment businesses.

 

Please take care if you are tempted to use a scheme that claims to save tax; talk to us first.

 

SELF-ASSESSMENT TAX RETURN DEADLINE

 

The filing deadline for self-assessment tax returns for the tax year covering 6 April 2022 – 5 April 2023, is 31 January 2024.

 

If you haven’t already provided us with the necessary information for us to complete this on your behalf, we would request that we receive this by 30 November at the latest, in order for us to have adequate time before the deadline to prepare this.

 

 

 

DIARY OF MAIN TAX EVENTS NOVEMBER/DECEMBER 2023  

 

Date What’s Due
01/11/2023  

Corporation tax for year to 31/01/2023 (unless quarterly instalments apply)

 

19/11/2023  

PAYE & NIC deductions, and CIS return and tax, for month to 05/11/23 (due 22/11/23 if you pay electronically)

 

01/12/2023 Corporation tax for year to 28/02/2023 (unless quarterly instalments apply)
19/12/2023  

PAYE & NIC deductions, and CIS return and tax, for month to 05/12/23 (due 22/12/23 if you pay electronically)

 

30/12/2023  

Deadline for filing 2022/23 tax return online in order to request that HMRC collect outstanding tax via the 2024/25 PAYE code

 

 

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