50% tax rate, Business Tax, capital allowances, capital gains tax (cgt), Personal tax, Share Schemes, Tax Planning, VAT

Top year end tax planning tips for 2012-2013

By RJP LLP

Now as the tax year draws to a close, it is a good time to ensure that you have considered all the options when it comes to reducing your tax bill with tax planning. In this article we look at what you could be thinking about now to legitimately reduce your liabilities.

Timing of income
This will be the last year of the 50% tax rate for individuals earning over £150,000. From 6th April 2013 it will reduce to 45%, so a key strategy for those affected is to ensure they are not in receipt of income prior to 6 April 2013 which could be received after that date.

Receive capital rather than income
If you are able to participate in an approved share option scheme such as the enterprise management incentive (EMI) you will be able to participate in the growth in the value of those shares which will be taxable as income. This can be structured so that the growth is taxed at the rate of 10% rather than, for example a bonus which will have a maximum tax rate of 50%/ 45% plus NICs.

Income equalisation
Are you a company director with significant earnings? Does your spouse have significant income on which they are required to pay tax? If they do not, and they have time available, it might be beneficial to employ them in your own company to take over some of your duties. The income they receive for doing this can utilise their personal allowance if available, and their basic rate band. If they are a shareholder in the company they will also be entitled to a share of dividends voted by the company.

Additional pension contributions
Are you contributing to a pension scheme? Ensure you make any contributions you wish to make before 6 April.

Bring forward planned capital expenditure
Does your company need to invest in capital assets? The Annual Investment Allowance (AIA) was increased to £250,000 in January 2013. This is pro-rated depending on the company’s year end, however ensuring you maximise use of this will reduce the company’s corporation tax liability.

Conduct a VAT review
For VAT registered businesses, there are a number of additional tax planning opportunities meaning you may be able to recover VAT paid over the year. For instance, by reviewing whether it is appropriate to continue using a flat rate scheme, cash accounting or annual accounting schemes. It may also be possible to achieve a better recovery of input tax paid and receive a VAT rebate.

Always view tax planning conservatively
Our advice to clients considering how to reduce their tax bills is to act cautiously and within the boundaries of what is legally acceptable in the eyes of HMRC. Aggressive tax planning strategies will cause you sleepless nights!

If you would like to discuss your tax affairs in more detail and think some of the opportunities outlined in the article might be relevant for your own situation, please contact Lesley Stalker by emailing las@rjp.co.uk.

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