Year end tax planning

We are approaching the end of another tax year – and an eventful one it has been! This has particular relevance to those who are self employed, either a sole trader or in partnership.

Due to the current economic downturn you may recently have experienced a drop in your profitability, indeed you may be trading at a loss.

If this is the case please read the check list that follows. We can help you to achieve the very best tax result if we are made aware, in good time, of your financial situation. Read the check list and call for a pre year end review.

If you are trading at a loss you may be eligible to carry up to £50,000 of the loss back for an extended period under new rules applying to the current year only. To maximise the losses claimed it may be beneficial to change your accounting date to 31 March 2009, if it is not already this date.

Timing of capital purchases or disposals, either before or after the end of the tax year, can be organised to maximise claims under the new Annual Investment Allowance of £50,000. (You can spend up to this amount each year on plant and equipment and get 100% relief in the year you spend the money)

If your profits have decreased this year, to 31 March 2009, compared to the previous year (31 March 2008), this may reduce the tax payments on account you offer in January and July 2009.
If you are forced to layoff staff and have some flexibility when you make redundancy payments, is this best charged in this current year, or the decision deferred to the next trading year?

What is your bad debt situation. Have you made adequate provision in your accounts. Has any VAT on bad debts over 6 months old been claimed back? Note that if you use Cash Accounting for VAT you only pay VAT added to your invoices when you are paid – so you don’t need to worry about claiming for bad debts.

If you have made a loss in this current year does this affect the tax relief you may have received on pension contributions? Will the tax have to be repaid or contributions recovered?

This is a year when careful consideration of your current trading position is paramount. There is no point in ducking this issue. If you do, you may end up paying more tax than is necessary. Paying less tax, or winning repayments of tax will only be one aspect of your fight to sustain a healthy cash flow – nevertheless it is not one you should ignore.

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