Corporation Tax savings to be made before the end of the year

8th March 2016

With the year end of 31 March approaching for many companies it would be useful to consider whether it is a good time to make any necessary expenditure which would save the Corporation Tax (CT) payable on the profits for the year.   The CT would be due 9 months and 1 day after the year end.  

Revenue expenditure 

There can often be a need for periodic refurbishment of a business premises which can entail a spot of decorating or laying some new carpets, or possibly something more substantial.   If this is something likely to be needed in the next few months it would be worth considering bringing it forward to fall in the current tax year and obtain tax relief 12 months earlier on this expenditure at 20%. 

Capital expenditure 

If the company is need of new assets such as a computer or piece of machinery, these would qualify for capital allowances at potentially 100% of the purchase price.   Even if financing was required for acquiring the asset the company will still benefit from a CT saving of 20% of the cost. 

Pension contributions 

The government are always keen for people to make pension contributions, and it is no different if they are made through a company. 

Any company pension payments would attract tax relief in the period when paid, so now may be the right time to see if there are funds available to do this and make sure the payment is made by the end of the year. 

Salary bonuses 

If the company has performed well then staff (or director) bonuses may well be in order.   Remember there will be Employers NIC payable on these at 13.8%. 

These amounts do not necessarily need to be put through the payroll by the end of the year and instead can be accrued for.   However the bonuses will need to be included in the payroll within 9 months of the year end or otherwise tax relief cannot be claimed. 

Research & Development (R&D) expenditure 

Any costs, including staff time, spent on R&D can result in an enhanced deduction of up to 230% of the costs. 

There are quite a few conditions attached to this type of expenditure.  Please get in contact if you would like more information on what would qualify.  

Conclusion 

Savings in tax can be made by making expenditure before the year end rather than leaving them until after.  However you should not incur costs in order to save tax if they cannot be justified from a business perspective.  

Do not let the tax tail wag the commercial dog!

Alex Koupland | Brighton Accountant | Plus Accounting

For more information on this matter, please contact Alex Koupland on 01273 701200 or alexk@plusaccounting.co.uk

Author: Alex Koupland, Manager @ Plus Accounting 

Any views or opinions represented in this blog are personal, belong solely to the blog owner and do not represent those of Plus Accounting. All content provided on this blog is for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. 

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