For all our clients and friends and contacts in London, Croydon, Wimbledon and around the UK, theseTax Planning Issues from a Chartered Tax Accountant should help you

Business owners

Many UK self-employed traders, or private limited companies, have set their business accounting year ends to coincide with the tax year end (31 March or 5 April). If your year end is end of March 2011 you may want to consider the following pointers that may help reduce any tax liability for 2010/11. The comments will also have some relevance for businesses, self-employed or limited companies, with year ends other than end of March 2011 - but obviously there may be more time to consider your options.

If you are considering significant capital or revenue expenditure during April 2011 or later in 2011 you may want to see if you can bring the payments forward and claim tax relief in the accounts to March 2011. This may involve you funding the payments earlier but you may possibly benefit from reduced tax bills a year earlier.

Following on from point 1, 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.

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; it will also reduce your tax bill or increase any loss relief carry backs.
If you are considering the sale of a business or business property that will create a chargeable gain for capital gains tax purposes, you might be advised to delay contracts 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 31 January 2013.

Tax payable on gains on or before 5 April 2011 will be due for payment a year earlier, 31 January 2012. At present CGT rates are still 18% or 28%. Also if your gain qualifies for Entrepreneurs' Relief your CGT liability will be reduced to 10% of gains - up to a lifetime maximum of £5m chargeable gains (for disposals after 23 June 2010). Of course it is always possible that capital gains tax rates will be increased in the 2011 Budget.

Consider your pension options. Could you make additional contributions before the 6 April 2011 to reduce your higher rate tax this year? But beware of the anti-forestalling provisions if your income is more than £130,000.

Directors and employees

Directors' pension contributions. From April 2011 the rules that determine the amount of tax relief on pension contributions are changing significantly. The annual limit on contributions allowable is dropping from £255,000 to £50,000. It may be worth seeking advice now to see if there is scope to top up directors' contributions before 31 March 2011.(These changes also affect self employed persons). Company contributions are usually, but not always, more tax efficient than personal contributions.

Directors' bonuses. As long as the commitment to pay director's 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. It is acceptable to hold a board meeting at which the liability to pay a bonus is crystallised by a decision, but the amount of the bonus is left undetermined until the accounts are finalised. 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.

Individuals

 - Have you maximised your ISA investments this year?
 - Have you maximised your pension contributions?

If possible have you utilised your capital gains tax personal exemption? £10,100 2010/11.

If your employer still pays for the private fuel used in your company car, you can effectively avoid the car fuel benefit charge if you repay your employer for the private fuel before the end of the tax year, or shortly thereafter. Please note that your employer will need to make this repayment a formal requirement of your employment. It may be worth crunching the numbers as the tax benefit in kind is expensive and the private fuel refund may be less. HMRC advisory fuel rates can be used to calculate the repayment necessary.

For Inheritance Tax purposes each person can give £250 a year to any number of recipients, as well as £3,000 annually over and above that. They can also make regular gifts out of their income (not capital) that should fall to be exempt.

If you are married or in a Civil Partnership and one partner/spouse has a much lower level of earned income, consider transferring income producing assets to the lower income earner. With the highest rate of income tax now at 50%, savings could be significant.

The ideas outlined above are by no means all the options you may have to minimise the amount of tax you pay this year. The key is to bring your current management accounts up to date and weigh the various options. Please call if we can help.

If you have a business in London (or commuting distance), Croydon, Wimbledon or around the UK, then we may be able to help you. Call Gordon D'Silva on 020 8241 3000.Please note that planning is specific to each client, and advice should be taken before acting on anything included in general articles.

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