In order to maximise tax saving opportunities for companies, appropriate course of action should be planned in advance. So, it is crucial that professional advice is sought before the year end and as early as possible. If your company is in Canary Wharf, Bromley, Kent and London areas we would welcome the chance to tailor a plan to your specific circumstances. Please do not hesitate to contact us at Adiva Accountants in Canary Wharf for further advice.
From 1 April 2015, the main rate of corporation tax is 20% and will continue the same for the Financial Year beginning on 1 April 2016. The main rate of corporation tax will then be reduced as follows:
- 19% for the Financial Years beginning on 1 April 2017, 1 April 2018 and 1 April 2019
- 17% for the Financial Year beginning on 1 April 2020.
Self assessment
Under the self assessment regime most companies must pay their tax liabilities nine months and one day after the year end.
If your company’s profits for an accounting period are at an annual rate of more than £1.5 million, you must normally pay your Corporation Tax for that period electronically, in quarterly instalments. If your company has a 12-month accounting period, you’ll have to pay in 4 equal instalments due:
- 6 months and 13 days after the first day of the accounting period
- 3 months after the first instalment
- 3 months after the second instalment (14 days after the last day of the accounting period)
- 3 months and 14 days after the last day of the accounting period
Corporation tax returns must be submitted within twelve months of the year end and are required to be submitted electronically. In cases of delay or inaccuracies interest and penalties will be charged.
Capital Gains
Companies are chargeable to corporation tax on their capital gains less allowable capital losses.
Indexation allowance
An indexation allowance is given, in order to counteract the effects of inflation inherent in the calculation of a capital gain. However, the allowance is not allowed to increase or create a capital loss.
Disposals planning
You should consider the timing of any chargeable disposals to ensure where possible advantage is taken of minimising the tax. Depending on circumstances this could be achieved by accelerating or delaying sales. You should also consider the availability of losses or the feasibility of rollover relief.
New assets purchase
If the sale proceeds are reinvested in a replacement asset, it may be possible to avoid a capital gain being charged to tax.
Only certain trading tangible assets qualify for relief. And the replacement asset must be acquired in the four-year period beginning one year before the disposal.
The government has proposed changes in 2016 Budget to make corporation tax losses more flexible. When losses arising on or after 1 April 2017 are carried forward, they will be available to be used against profits from different types of income in the company and other group companies. However, where a company’s or group’s profits are above £5 million, there will be a restriction on the use of carry forward losses. Any profits over £5 million arising on or after 1 April 2017 cannot be reduced by more than 50% by brought forward losses.
The extraction of the profits
Directors/shareholders of companies may wish to consider extracting profits in the form of dividends, rather than as increased salaries or bonus payments. This is beneficial as it can lead to substantial savings in national insurance contributions. Please note that company profits extracted as a dividend remain chargeable to corporation tax at a minimum of 20%.
Dividends
The timing of the dividend’s payment is not critical from the company’s point of view. But from the individual shareholder’s perspective, timing can be an important issue. The tax liability can be delayed by one year, if the shareholder is a higher/additional rate taxpayer, and a dividend payment is delayed until after the tax year ending on 5 April. There are a number of important factors to consider before the deferral of tax liabilities. So, please contact us at Adiva Accountants in Canary Wharf for detailed advice.
Loans to directors and shareholders
The company might have to pay a tax liability if it makes a loan to a shareholder. If the loan is still outstanding after nine months of the end of the accounting period, the company is required to make a payment equal to 25% (32.5% for loans made on or after 6 April 2016) of the loan to HMRC. The money is not repaid to the company until nine months after the end of the accounting period in which the loan is repaid by the shareholder. If the loan is provided at an interest rate lower than the market rate, this may also give rise to a tax liability for the director on the loan benefit.
At Adiva Accountants in Canary Wharf, we can provide tax advice for your company in Canary Wharf, Bromley, Kent and London areas. For further advice on proposed changes, dividends and loans, please do not hesitate to contact us at Adiva Accountants in Canary Wharf.
Corporation tax
The Advancing of expenditure
If the expenditure is incurred before the company’s accounts year end, it can reduce the current year’s tax liability.
There are many situations where significant expenditure is planned for early in the next accounting year. If you bring forward this expenditure by just a few weeks to fall within the current year, the related tax relief is received 12 months early.
Below are some examples of the type of expenditure to consider bringing forward:
- building repairs and redecorating
- advertising and marketing campaigns
- redundancy and closure costs
Please note that payments into company pension schemes are only allowable for tax purposes when the payments are made. And not when they are charged in the company’s accounts.
Capital allowances
You should consider the timing of capital expenditure on which capital allowances are available to obtain the maximum reliefs.
Companies are able to claim an annual investment allowance which provides 100% relief on expenditure on plant and machinery, excluding cars. The amount of AIA available for a particular accounting period varies depending on the accounting period.
| Periods from | Annual limit |
| 1 April 2014 | £500,000 |
| 1 January 2016 | £200,000 |
There are special rules where accounting periods straddle one of the above dates.
Groups of companies have to share the same allowance. The expenditure on qualifying plant and machinery which is in excess of the AIA is eligible for writing down allowance (WDA) of 18%. Where the capital expenditure is incurred on integral features the WDA is 8%. Additionally, there are 100% allowances on designated energy saving technologies. Other limited allowances are also available for investments in certain types of building.
Trading losses
There are three main options for companies to consider in utilising the trading losses:
- they can be set against any other income (e.g. bank interest) or capital gains arising in the current year
- they can be carried forward and set against trading profits arising in future years
- they can be carried back for up to one year and set against total profits.
At Adiva Accountants in Canary Wharf, we can provide tax planning advice for your company in Canary Wharf, Bromley, Kent and London areas. For further advice on tax savings for companies, please do not hesitate to contact us at Adiva Accountants in Canary Wharf.
It is crucial to consider tax saving opportunities before the year end of the company. Also, before the tax year end of the shareholders or directors of the company. At Adiva Accountants in Canary Wharf, we can provide pre-yearend tax planning advice for your company in Canary Wharf, Bromley, Kent and London areas.
The tax legislation and commercial factors affecting your company are continually changing. So, it is advisable to carry out each year a review of your company’s tax position.
This review and tax planning is important to be carried out before the company’s yearend. This is because the current year’s results can normally be predicted with some accuracy. And importantly if needed there is time to carry out any appropriate action.
Below we cover some of the areas where advance planning may produce tax savings. For further advice, please do not hesitate to contact us at Adiva Accountants in Canary Wharf.
