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Things to consider for 2013-2014

Posted Mar 27, 01:42 PM

By darren

The end of the tax year approaches….

…just a few reminders of things you might like to think about as we approach the end of the tax year.

Income Tax rate change

The top rate of Income Tax will shortly fall from 50% to 45%. For those who pay tax at this highest rate there may be benefits in delaying income until after 5 April 2013. This can be quite easy for owner managed businesses so should at least be on the agenda for discussion.

Capital Allowances AIA

The recent change in the rate of Annual Investment Allowance was welcome but care is still needed. The amount of expenditure on plant and machinery which qualifies for full relief rose from £25,000 to £250,000 p.a. However the transitional rules give rise to peculiar figures depending on your accounting date and the date when plant is purchased. If significant expenditure is being contemplated the timing could make a substantial difference to the available allowance. It is best to work out the exact figures in advance.

Higher Rate Child Benefit Charge

The new Income Tax charge to claw back Child Benefit for those who earn over £50,000 came into force in January. Taxpayers can avoid the charge by disclaiming the Child Benefit before the start of the tax year. Where a person would not otherwise prepare a tax return consideration should be given to making an election to disclaim the benefit.

Using annual allowances

As we approach 5 April it is always wise to consider whether all annual allowances have been used. There are annual allowances for Income Tax, Capital Gains Tax and Inheritance Tax to be considered.

Tax bands should also be utilized to their full. In owner managed companies payments of dividends to utilise the basic rate band can help with long term tax minimisation. If the shareholder is a basic rate taxpayer no additional Income Tax charge will apply on payment of a dividend. This may not be the case in another year when income may be higher. It can be beneficial over the long term to consider setting aside profits while this can be achieved in a tax efficient manner. Where this causes a cash flow issue the dividend can safely be loaned back to the company.

Annual investment limits should also be considered where appropriate such as for ISA’s, Pensions, EIS and VCT investments.

Capital Gains – SEIS

The new Seed Enterprise Investment Scheme presents a time limited opportunity for this year only. Gains realised in 2012/13 can be exempted by a SEIS investment. This may present a unique opportunity to realise latent gains without a tax charge. An SEIS investment can be made in 2013/14 and carried back if desired. The important point is to realise the gain before 5 April 2013.
New investment opportunities are coming onto the market all the time. SEIS investments are of course high risk investments but the tax reliefs are extraordinarily attractive and in some circumstances exceed the cost of the investment.
Coming soon….
There are a number of significant changes coming soon which we should prepare for. Here are three worth thinking about;

  • Real Time information (RTI) for reporting pay and tax details will not cause problems for the vast majority of employers. Small employers and those with irregular work patterns may need help to comply with the regulations.
  • The draft clauses for the Disincorporation Relief to be introduced next year have been issued. In many circumstances where you are looking to get out of a company structure this relief may be worth waiting for.
  • Cash accounting for smaller businesses will be included in the 2013 Finance Act. The legislation allows businesses to opt in and out of the rules on an annual basis. This is supposed to simplify the tax system but actually creates another option to be considered.

What people are saying

“As a relatively new start up business we are still very sensitive to costs. Recently we received a quotation from QBS Online on a “like for like” services basis with our existing accountants. We have made the decision to move to QBS which will realize a 36% reduction in our accountancy costs. This is most welcome news at a time where every penny counts.”

- Nigel Messenger, MD, Castleman UK Ltd

Using QBS has changed the way we do business. Previously we were using many suppliers to help us with things like accounts, payroll, even IT support. Now we use QBS for all manner of business procedures, which has simplified our outgoings and allowed us more time to spend on growing our business.

- DH, Haus Digital Ltd




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