Tax Planning: The Levers Under Your Control

In many situations a tax planning review may identify opportunities to minimise the tax you are liable to pay on a transaction.

These ’opportunities’ will relate to:

Do not make the transaction/action

• If being reviewed in advance, don’t do something that triggers a tax charge (eg extracting money from a company).
• Reverse or rescind the transaction (eg repay overdrawn directors loan account within 9 months and 1 day of your company year end).

Make a separate transaction/action that has a consequence to taxation of the primary transaction

• Do something that influences the total same tax type (eg move spare company cash to within a pension scheme).
• Get married (eg to effect inheritance tax on bequest to your spouse).
• Appoint a director (eg to obtain entitlement to business asset disposal relief rate of CGT).
• Make and minute a Board decision (eg to evidence the period a bonus relates to).
• Write a Will (eg to obtain a more favourable inheritance treatment than under intestacy rules).

Influence the value of a transaction

• Lower sale value generally = lower tax (eg, have a personal tax strategy such as both spouses on £60k, so as to retain child benefit).
• Higher expense value generally = lower tax (although “don’t let the tax tail wag the dog”).

Influence the timing of a transaction

• eg relative to the tax year 5/6 April, your company year end, a known or anticipated future rule change or event (eg Budget), other transactions, pre or post your retirement, after a minimum qualifying period or, your age (eg treatment of how you fund your retirement income requirement relative to 75 year age threshold).

Restructure other aspects of the transaction

• The parties involved (eg purchase a new EV car within your limited company).
• The nature (eg convert your business into a FIC).
• Location (eg move offshore).

Make a claim/election/option

• Deduction (eg maximise valid business expenses, such as working from home).
• Relief (eg SA302 election to reduce self-assessment payment on account).
• Allowance (eg claiming structures and buildings allowance on building expenses).
• Exemption (eg from declaring statutory compensation as a tax free gain/income).
• Exception (eg from requirement to register for VAT as turnover increase only believed to be temporary).
• Appeal (eg for a tax penalty to be postponed, as first offence).
• Follow case precedent (eg Phillips case, for money lending business to be treated as a trade for inheritance tax purposes).
• Take advantage of choices that tax legislation sometimes gives you (eg opt to tax a commercial building for VAT purposes).

Optimise the disclosure

• When tax is based on business profits you often have a choice of the accounting policies followed to calculate those profits (eg stock obsolescence provisions).
• How something is submitted to HMRC is disclosed within the tax return boxes, white spaces and attached documents can also sometimes influence tax treatment (eg stating assumptions relied upon).

Get In Touch

Speak to one of our tax advisers at your local Whitings LLP office to see if your tax can be reduced. Ideally, this should be before you make the transaction but, as you will see from 1, 2, 6 and 7 above, sometimes we can still mitigate the tax afterwards.

Disclaimer - All information in this post was correct at time of writing.