Are you tired of receiving notices of your company's Corporation Tax liability a couple of days before your due date?
Would you prefer to have your annual accounts and company tax return submitted earlier to avoid unnecessary stress?
A last-minute approach can have costly effects for an Owner-Managed Business and can put undue pressure on a business that has other pressing commitments.
Not only can this approach have a physical toll on a business (i.e. no time to plan and save for an unexpected tax liability), but business owners may also find that they miss potential planning opportunities available if they’d had their annual company accounts and tax returns earlier.
Business owners may find a more year-round approach to managing their company accounts to be effective.
What does year-round tax planning actually mean?
Examples of year-round planning (but not limited to) are:
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Continuous monitoring of financial performance and cash flow.
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Ongoing forecasting of future tax liabilities.
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Staying up-to-date on changes in tax laws.
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Strategic decision making (i.e. deciding when to acquire new assets, etc).
Benefits of year-round tax planning
There are important benefits to year-round tax planning:
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Improved cash flow management – Forecasting tax liabilities and other expenditures throughout the year helps businesses set aside funds for liabilities and avoid unnecessary borrowing.
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Enhanced business agility – A year-round approach to tax planning ensures businesses can adapt quickly to changes to UK tax laws.
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Tax-efficient planning – Continuous monitoring allows businesses to better time capital purchases. Directors can also ensure that they are tax-efficiently extracting funds from their companies.
Common mistakes made towards tax planning
The following common mistakes can have a significant impact on businesses:
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Poor record-keeping.
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Leaving everything until the company year-end passes, rather than continuously monitoring financial performance and cash flow.
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Making your accountant aware after doing something rather than before.
First steps business owners can make
Tax planning can be daunting for business owners, and it can be difficult to know where to start. Therefore, the following are some suggestions on where business owners can start:
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Set quarterly check-ins with your accountant.
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Use cloud accounting software (e.g. Xero).
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Set up a separate bank account to set aside funds to pay future tax liabilities. For ease, you may want to determine what size buffer you need to set aside.
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Review your director remuneration strategy.
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Plan for significant capital purchases to maximise the utilisation of available allowances.
Make tax work for you
Business owners can be very busy, and tax planning may not be a high priority on the to-do list. However, year-round tax planning can make a big difference towards the smooth and efficient running of a business. Our Owner-Managed Business team at Shorts are happy to assist with year-round tax planning and can tailor a solution to suit your needs.
Bradley Redfearn
I am a Chartered Tax Adviser working within the Owner Managed Business Team at Shorts, advising clients on all areas of business taxes. Over the years, I’ve managed a diverse client portfolio, helping them navigate complex tax issues, improve efficiency, and plan strategically for the future.
View my articlesTags: Business Taxes, Corporation Tax
