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Steps to take before the April tax year end

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Monday February 7, 2011 at 10:00am

With the financial year end only a few months away now is the time to start taking last minute action to try and reduce your 2010/11 tax liability and save on tax.

Business owners action plan 

1. Bring forward capital expenditure. If you are considering significant capital or revenue expenditure this year you may want to see if you can bring the payments forward and claim tax relief in the accounts to March 2011.

There are still generous capital allowances for purchases of equipment that qualify for the Annual Investment Allowance. The annual limit is set at £100,000 to April 2012 when it will be reduced to just £25,000. So keep this date in mind if you want to get the full benefit from the allowance.

2. Consider revaluing stock. If you are carrying stock on your balance sheet at cost and it is now worth less than cost, you should revalue, reducing the stock to its current realisable value. This will reduce your trading profit in the current year or increase your losses.

3. Don’t sell just yet. If you are considering the sale of a business or business property it might be best to delay until after the 5 April 2011. For individuals, any tax payable on gains made on or after the 6 April 2011 will not be due for payment until 31st January 2013. Tax payable on gains on or before 5th April 2011 will be due for payment a year earlier, 31 January 2012. At present Capital Gains Tax rates are still 18% or 28%. Also if your gain qualifies for Entrepreneurs' Relief, your Capital Gains Tax liability will be reduced to 10% of gains subject to the lifetime maximum of £5m. Do bear in mind however that it is always possible that capital gains tax rates will be increased in the 2011 Budget.

4. Consider your pension options. Could you make additional contributions before 5 April 2011 to reduce your higher rate tax this year?

With the annual limit on contributions attracting tax relief dropping from £255,000 to £50,000 from April 2011, it’s worth taking advice now to see if there is scope to top up contributions in advance of the deadline.

5. Get tax relief on 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. 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.

Getting your management accounts up to date and reviewing the profit position and likely tax liabilities with your accountant will help you plan and make tax savings.

Andy Parker
Chartered Accountant Birmingham

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Parker Chartered Accountants and Financial Advisors is the trading name for Parker Business Development Ltd (Registered No. 4116664), Parker Tax and Trust Ltd (Registered No. 06950353) and Parker Financial Planning LLP (Registered No. OC347027). Parker Financial Planning LLP is authorised and regulated by the Financial Conduct Authority. All companies are registered in England and Wales – registered office contact details here