Do you own and trade through a limited company?

Here are five straightforward tips for either saving your company some Corporation Tax, or extracting money from the company tax efficiently.

Dividends

One of the benefits of being a shareholder in a limited company is the ability to be receive dividends.  Dividends are taxed at a lower rate than other kinds of income and do not attract a National Insurance liability.

Your company must have sufficient retained profits in order to pay any dividends and the correct paperwork must be completed and declared properly in accordance with company law requirements. We can help you with this.

One thing to take care of when using the dividend route is to make sure that those receiving dividends still receive a salary high enough to maintain their National Insurance Contributions record.

Pension Contributions

Your company can make contribute towards your pension. The payments are deductible expenses for Corporation Tax purposes in the year they are made.

Using pension vehicles such as Small Self Administered Scheme (SSAS) or a Self-Invested Personal Pension (SIPP) can be beneficial when business premises are being purchased as the rent received will not be taxed in the SSAS/SIPP and the company will usually receive a tax deduction for the rent paid.

This can also be advantageous when you sell your business. It’s a lot easier sometimes to sell the business and have it rent its premises from your pension fund than it is to sell both the business and the premises.

Annual Investment Allowance

The annual investment allowance, or AIA for short, is a capital allowance which provides full write off of qualifying capital expenditure in the year of purchases for plant and machinery.  The allowance is £500,000 a year until 31 December 2015.

By reviewing and planning expenditure it is possible to reduce profits subject to Corporation Tax.

Company Cars

Have you considered whether the cars used in your business would be better owned personally? If you use a company car personally you will be taxed on the benefit-in-kind and the company will pay Class 1A National Insurance.

Owning the car personally will not attract the benefit in kind and mileage can be claimed at the approved rate of 45p/25p per mile. The right choice however will depend on the circumstances and the vehicle involved.

We can review your situation and advise whether it’s more tax efficient to own the vehicle yourself, or run it through your company.

Family Members

Do your family members (spouse, children) help or work in the business? If so, then consider whether they should own shares in the company too. That way you can take advantage of their basic rate allowance and pay dividends to them as well.
If you have children aged at least 13 who earn less than £7,956, and they help out in your business, then you can pay them a wage to reduce taxable profits. You can also pay your spouse or partner for any work they do in the business. We can advise you on the most tax efficient salary levels.

If you want advice on any of these issues, then please contact us today on 01237 421342.