Introduction Everyone dislikes paying tax but in the end
we all have to pay our share. For some people, tax is like theft and
they resort to illegal means to pay less tax. However there are numerous
legitimate means to reduce those dreaded tax bills.
This tax planning health-check is designed to cover all
of the common (and a few obscure) ways of saving tax that are legal. Of
course this is a checklist and before implementing any specific ideas
you must discuss them with your accountant as everyone’s individual
circumstances are different.
We hope this health-check identifies
some new tax saving ideas for you. If it doesn’t at least you can
sleep safe in the knowledge that you are probably doing most of the right
things to minimise those tax bills.
The checklist should take no more
than 20 minutes to complete. You can print it off and complete off line
if you prefer.
You can then arrange to meet with
us in person to go through any areas where tax saving opportunities have
possibly been identified.
If there are any areas you are interested
in that your accountant hasn’t already spoken to you about, tick
“No”. If they have, tick "Yes" or if you don’t
feel it is an area of interest, tick N/A.
Whilst every effort has been made
to ensure the accuracy of this health-check we cannot accept any liability
for any errors or omissions contained herein nor liability for any person
acting or refraining from action as a result of information contained
here. You must meet with us to discuss your personal circumstances.
Business Planning
Has your
accountant mentioned this?
1
If your spouse earns less than the single
persons allowance of £4895 per year and helps out in your business
you can pay them a wage to reduce your taxable profits.
Yes
No
N/A
2
If your children earn less than the single
persons allowance and help out in your business you can pay them a
wage to reduce your taxable profits. This can have a big effect on
your tax bill when the business ceases.
Yes
No
N/A
3
Have you considered what is
the best date to have your accounting year end and are you fully aware
of the effect of overlap relief by having this date.
Yes
No
N/A
4
Do you make sure you always have a pre
year-end tax planning meeting with your accountant to make sure all
necessary action is taken before your year end. After then it will
probably be too late.
Yes
No
N/A
5
If you are a sole trader paying 40% tax
and your wife helps out in the business but is a lower rate taxpayer,
have you considered making your spouse a partner to allocate some
profits to them at a lower rate of tax.
Yes
No
N/A
6
If you are a sole trader earning less than
£4345 per year there is no need to pay Class 2 national insurance.
Yes
No
N/A
7
Have you considered whether you have the
right legal structure for your business. If you are a sole trader
or partnership paying higher rate tax you should consider using a
Limited Company. However the first £10,000 of Ltd Co profits
are no longer taxed at 0% if you take these out by dividends. Have
you also considered the Limited Liability Partnership structure now
available.
Yes
No
N/A
8
Make sure you buy assets such as equipment,
computers, motor vehicles, etc at the right time to get tax relief
as early as possible. Buying equipment just before rather than just
after your year end can get you tax relief for capital allowances
a year early.
Yes
No
N/A
9
If you have personal loans or are considering
taking out a personal loan you may be able to reorganise your finances
so that these are business loans. By doing this you will get tax relief
on the interest on the loan.
Yes
No
N/A
10
Is your business structured correctly so
that when you finally come to sell it, the amount of Capital Gains
Tax payable is minimised. This needs doing now, not when you come
to sell. Don’t give away a large proportion of everything you
have built up.
Yes
No
N/A
11
If your business has made a loss, make
sure you have claimed relief for the losses by setting it off against
previous or future profits or other income.
Yes
No
N/A
12
If you have previously been involved in
a business in which you subscribed for shares and you lost money,
you can subject to a few conditions claim tax relief for the loss
by set off against profits from your trade.
Yes
No
N/A
13
If you have a boat that you sometimes charter
out you can look at claiming capital allowances on the boat.
Yes
No
N/A
14
If you work from home make sure you are claiming for
use of home. Look to claim a proportion of items such as mortgage
interest as well as gas, electricity, water rates etc.
Yes
No
N/A
15
Are you aware that Capital Gains Tax on
business assets held for 2 years is now just 10% and for 1 year is
just 20% which means you should look to take advanctage of these low
rates.
Yes
No
N/A
Business planning,
especially if you have a Limited Company
16
Make sure you extract money from your limited
company in the most tax efficient way. Look at using dividends to
avoid paying any employees or employers national insurance. Often
the best route is a mixture of PAYE salary and Dividends and benefits
in kind.
Yes
No
N/A
17
Have you looked at the rate of Corporation
tax you are paying and taken all necessary steps to minimise this.
Did you know that on the first £10000 of profits you pay no
tax at all if you leave the profits in your company and on those above
£50000 you pay 19% but in between the rate goes up to 23.75%.
Once your profits go above £300000 the rate goes up to 32.75%.
Yes
No
N/A
18
If your Ltd company works mainly for one
customer for long periods of time or you use the services of a Ltd
company like this watch out for IR35 where you can become liable for
national insurance and more on all the payments. Make sure you have
taken the necessary steps to avoid IR35. Employees – remember
that if you are a director of your own Ltd company that this includes
you.
Yes
No
N/A
19
Have you got a staff suggestion scheme.
This allows amounts to be paid tax free to your employees for suggestions
they make which are outside the scope of their normal duties.
Yes
No
N/A
20
Have you got any employees who have worked
for you for more than 20 years. You can give them a long service award
worth £1000 tax free in the form of a tangible article.
Yes
No
N/A
21
If your PAYE payments to the revenue are
less than £1500 per month you can pay quarterly rather than
monthly to help your cash-flow.
Yes
No
N/A
22
If you have people who work mainly for
you on a self-employed basis, are you sure they should be classified
as self-employed. Getting this wrong can cost a fortune. Make sure
everything is put in place to maximise your chances of the Revenue
agreeing self-employment.
Yes
No
N/A
23
Have you looked at making senior employees
working for you, a partner in the business. This can save lots of
employers national insurance on their salary.
Yes
No
N/A
24
When you take on a new employee make sure
you either get a P45 from them or get them to sign a P46. You will
need this to ensure you can allocate some allowances to your employees.
Without them you will be liable for any tax not correctly deducted.
Yes
No
N/A
25
If your employees subscribe to an approved
professional organisation they can claim tax relief on the subscription.
Yes
No
N/A
Benefits in Kind
26
If you have a LTD company, have you considered
whether cars used in the business are better owned personally by you
or by the business. If you own the car personally you will not be
taxed on a benefit in kind and can re-claim your mileage under the
fixed profit car scheme. Which is best for you will depend on your
car and various other factors which your accountant should calculate.
Yes
No
N/A
27
If your employee receives less for fixed
mileage allowances than the fixed profit car scheme allows they can
claim tax relief for the difference.
Yes
No
N/A
28
Make sure you complete all P11D’S
for benefits in kind and expenses correctly and send them in on time.
Failure to do so can result in a £3000 fine per P11D.
Yes
No
N/A
29
Try to obtain a dispensation not to report
certain expenses on your P11D’S to cut down on your administration.
Yes
No
N/A
30
Make sure all business mileage is recorded.
Yes
No
N/A
31
Have you reviewed your petrol situation
as benefits on the provision of petrol have risen over recent years.
Yes
No
N/A
32
The following benefits can be paid to staff
tax free: Provision of mobile phones, use of a pool car, provision
of workplace nurseries, relocation expenses, luncheon vouchers, green
transport.
Yes
No
N/A
Personal Planning
33
By contributing to a personal pension you
can get tax relief on your contributions. If you are a 40% taxpayer
this means for every £100 you contribute your tax bill will
reduce by £40.
Yes
No
N/A
34
Have you reviewed your pension situation
since the 1997 budget, which significantly reduced the tax benefits
on the income earned by pension schemes.
Yes
No
N/A
35
Do you have a will in place. Without one
your estate may not go where you want it to go. Have you also considered
the inheritance tax consequences of your death and ensure this has
been minimised.
Yes
No
N/A
36
If you are ill or die what will happen
to your business. Have you looked at Life Assurance, Critical Illness
cover and Permanent Health Assurance and have you reviewed them recently.
Yes
No
N/A
37
If you want to leave gifts to your loved
one’s, have you considered making the gifts now. If you make
gifts now and live 7 years they will not be liable to inheritance
tax.
Yes
No
N/A
38
If you give to Charity have you arranged
the gifts so that the Charity can reclaim a tax credit on the gift.
Yes
No
N/A
39
From April 2003, the Child Tax Credit was
introduced for families earning up to £58,000 per year which
you need to claim in order to get.
Yes
No
N/A
40
If you want to avoid tax by using offshore
schemes you really need to look at emigrating for them to work.
Yes
No
N/A
Investments
41
Do you take advantage of investments where
the income or growth on them is tax free. You should consider ISA’s
and national savings.
Yes
No
N/A
42
Are your investments held between you and
your spouse so as to minimise your tax. If you pay a higher rate of
tax than your spouse you should consider transferring the investments
to your spouse to reduce tax.
Yes
No
N/A
43
Do you make use of your Capital Gains annual
exemption each year. If you have assets on which you have a gain you
should consider disposing of them to make use your annual exemption
of £8500. After 30 days have passed you can buy them back again.
Otherwise your annual exemption is wasted and is lost forever.
Yes
No
N/A
44
If you are a non taxpayer make sure you
receive any bank or building society interest gross, without any tax
stopped.
Yes
No
N/A
45
For a few investments you can actually
get tax relief on the capital amount you invest. These include pensions,
venture capital trusts, enterprise zone properties and use of the
enterprise investment scheme.
Yes
No
N/A
46
If you invest in premium bonds all prizes
are tax free. You normally get a reasonable rate of return and always
have the chance of the big one. The lottery is not such a sound investment
but again the prizes are tax free.
Yes
No
N/A
47
If you transfer any assets to your spouse
no capital gains tax is payable on the transfer.
Yes
No
N/A
48
Have you taken advantage of all the Capital
Gains tax exemptions available. Did you know that most of the Capital
Gains Tax legislation is about exemptions rather than about what is
taxable.
Yes
No
N/A
Property and loans
49
Have you looked at your mortgage provider
to make sure you are getting a good deal. Often thousands can be saved
by switching providers.
Yes
No
N/A
50
If you are moving home have you looked
at drawing funds out of your business and replacing them with a business
loan rather than taking out a personal mortgage. With business loans
you obtain full tax relief on the interest on the loan but you don’t
with a personal mortgage.
Yes
No
N/A
51
If you are selling or buying a house watch
out for the points at which stamp duty kicks in and increases. For
example a house sold for £119,900 would have no stamp duty but
a house sold for just £101 more would attract £1200 of
stamp duty. Look at reducing the price or allocating some of the proceeds
to other items such as furniture. The other critical points are £250,000
and £500,000.
Yes
No
N/A
52
If you rent a room out in your house, the
first £4250 of rental income you receive each year is free of
tax.
Yes
No
N/A
53
If you rent a furnished property out you
can claim 10% of the rent as an allowance for wear and tear on the
furnishings.
Yes
No
N/A
54
If you are buying a property to rent out,
it can often make sense to borrow the money even if you don’t
need to, as you get tax relief on the loan interest. You may then
have an alternative use for the money.
Yes
No
N/A
VAT
55
Make sure you register for VAT as soon
as you should to avoid severe penalties. The registration limit is
£60000 of turnover per annum.
Yes
No
N/A
56
If you register for VAT you can still reclaim
the VAT on various items purchased before you registered if they relate
to sales that are made after registration. E.G.Stock for resale, computers
etc.
Yes
No
N/A
57
If you receive any suppliers invoices after
you have de-registered that relate to the sales before you de-registered
you can reclaim the VAT on these.
Yes
No
N/A
58
If you reclaim business mileage by means
of a fixed mileage allowance you can reclaim VAT on part of this allowance.
The part of the allowance that relates to petrol (according to AA
rates) can have VAT reclaimed on it.
Yes
No
N/A
59
You can claim back VAT on any debt that
is more than 6 months old.
Yes
No
N/A
60
For businesses with a turnover of less
than £150,000 per year you can use the Flat Rate scheme for
the calculation of VAT due making the completion of VAT Returns far
easier.
Yes
No
N/A
61
If your annual turnover is below £660,000
you can use the VAT cash accounting scheme so that you only pay Vat
when you receive payment from your customers rather than when you
raise the sales invoice. This can benefit cash flow greatly.
Yes
No
N/A
Administration
62
If you want the Revenue to calculate your
tax bill each year make sure you send it in before 30th September.
If you are happy to calculate the tax but want to avoid a fine make
sure it is in before the 31st January.
Yes
No
N/A
63
If your taxable income decreases so that
your tax bill is going to decrease you can apply to decrease your
payments on account in January and July.
Yes
No
N/A
64
Make sure you pay your tax liabilities
on time to avoid interest and further penalties.
Yes
No
N/A
65
If the Revenue make a mistake and forget
to bill you for tax owed and a lot later discover their mistake when
you had been led to believe everything was up to date, you can ask
for the tax to be waived under an extra statutory concession.
Yes
No
N/A
66
If you receive any queries from the Inland
Revenue, Customs & Excise or the DSS or they wish to visit you,
make sure you ask your accountant about any questions you answer before
doing so. Ask for any questions to be put in writing if you wish.
A wrong answer can be a costly mistake.
Yes
No
N/A
67
The taxman makes mistakes. Do not be bullied into
paying tax that is not due. We fight hard for our clients.
Yes
No
N/A
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