Garbetts Newsletter March 2008

Business tax planning - action before 6 April 2008

We have noted below a number of tax issues that you may like to review prior to the end of the current tax year, 5 April 2008.

Capital Allowances. Clients may be advised to seek our advice before committing to any further capital expenditure before 5 April 2008. As from 6 April 2008 it is likely that new rules will apply to the way in which you are able to claim capital allowances for the purchase of certain qualifying assets. The Government has said it will introduce a new Annual Investment allowance. Essentially from the end of this tax year businesses will be able to write off 100% of their expenditure on plant and other equipment (excluding most cars) up to an annual limit of £50,000. This Annual Investment Allowance will apportioned in the first year if your year end is not 31 March. For instance if you spend £24,000 on a qualifying asset in April 2008 and your year end is June 2008; one-quarter of the £24,000, £6,000 will qualify for the 100% write down; any balance will be carried forward. This will only affect businesses whose accounting year end straddles 5 April 2008. Because of these changes businesses may be disadvantaged if they commit to capital expenditure before 6 April 2008. If you have plans to acquire assets you may be advised to check out the pros and cons of delaying the expenditure until after 5 April 2008.
Benefits in Kind. Don't forget that if your employees reimburse you for the use of a company asset, or to cover other personal payments that have been made on their behalf, no benefit in kind will arise, and therefore no tax will be due. In most cases reducing taxable benefits in this way will also reduce the National Insurance Class 1A contributions for the business.
Corporation Tax Rates. If your taxable profits are likely to take you over the small companies rate, (currently your company can earn up to £300,000 at the small companies rate of 20%, unless you have associated companies which can reduce this entitlement), you could consider bringing forward expenditure to keep your profits under the threshold. The expenditure could be a business expense or capital expenditure.
Pension contributions. Tax relief on pension contributions made by the company is only available in the period in which the contributions are actually paid, so if it is planned to increase contributions in respect of the current year, these need to be paid out during the period.
Directors’ bonuses year to 31 March 2008. Where it is planned to pay directors bonuses out of current profits it is necessary to hold a directors’ meeting confirming the decision to do so. This should then be minuted, even if the exact amount of the bonus is to be determined later. In this way the liability for the bonus is created in the current period, and it will be acceptable to provide for the bonus in the accounts. The bonus should then be finalised and paid out within 9 months of the year end to secure a corporation tax deduction for the payment.

These are just a few of the possible planning issues that you should take a look at before 5 April 2008. Please call if you need to clarify any issue prior to a 31 March year end.

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		Could you cope if you couldn't work?
	You only get one ISA allowance every tax year. You cannot carry your allowance over to next year and therefore, if you do not do something about it, come the end of the tax year, you will lose it. The allowance for the 2007/08 tax year is £7,000 and is available to be used anytime up until 5th April. If you haven’t already sorted out your investment for this tax year talk to your Garbetts Financial Strategies Adviser as soon as possible. We forecast the markets to remain volatile until at least the third quarter of this year. If you have already invested in your ISA for 2007/08 and you are concerned about the market volatility affecting your ISA investment in 2008/09, you could drip feed your money in on a monthly basis. Investing smaller, regular amounts helps to smooth returns as markets fluctuate. This system is called 'pound cost averaging' and can offer benefits in a volatile or falling market. Regardless of how you invest your money, you must get your 07/08 contribution in before April 5th or your allowance is gone. Have a conversation with your adviser, do your research, but start now and make sure you don’t lose out. Give us a call on 01983 527111 if there is anything you wish to discuss. www.garbetts.com/gfs Back to top


	DISCLAIMER - PLEASE NOTE: The ideas shared with you in this email are intended to inform rather than advise. Taxpayers circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.