AVRUPA TIMES/ENGLAND-Chances are, it’s been a tough year so far: in the 12 months to May 2023, the consumer prices index of inflation rose by 8.7% and the bank rate is 5%. A skills shortage and the cost of energy continue to hurt businesses.However, the Institute of Directors’ (IoD) index for business leader optimism stabilised at -6 in May, much improved from the -64 we saw in November 2022.According to the IoD’s surveys, 55% of business leaders even expect revenues to rise in the year, compared to 19% who expect theirs to fall. Another 35% expect to increase their headcount in the next year, compared to 14% who expect it to reduce.So, with 2023 still marked by an air of uncertainty, how are you going to make sure your business doesn’t just survive, but thrives in the current economic climate?
BUSINESS TAX PLANNING
Businesses face a tough tax treatment in 2023: corporation tax is higher for some companies, the income tax threshold remains frozen, and the capital gains tax and dividends tax allowances have been reduced.Therefore, a great place to start with your mid-year review is to check whether your business is as tax-efficient as possible and create a tax plan.
Every tax plan will be different according to each business, but most can reduce their tax burden by claiming every allowable expense possible. By offsetting these against your pre-tax profit, you reduce the figure HMRC applies a tax rate to — ultimately reducing your tax bill.To be allowable for tax purposes, expenses must be incurred “wholly and exclusively” for business purposes. So, training courses, staff expenses, stock for resale, raw materials, business travel, marketing costs, home office costs and uniforms (but not ‘regular’ clothes you wear to work) — they’re all allowable, as long as they fit HMRC’s criteria.The most important part of allowable expenses is to ensure that your bookkeeping and record keeping is up to scratch — if you lose a receipt for an expense, for example, you’ll struggle to convince HMRC you actually purchased the item.
If you purchase longer-life assets, you may be able to write off their value from your pre-tax profit through capital allowances.Some, like the annual investment allowance (AIA) and temporary full expensing scheme, allow you to claim the full amount of certain assets in the same year you purchased them.Then there’s the writing-down allowance, which a lot of companies use if they exceed the AIA limit (£1 million) orthe asset does not qualify for the AIA or full expensing. This scheme lets them claim 6% or 18% of the value of an asset each accounting year, depending on the asset.Finally is the first-year allowance, which allows you to claim the full cost of specific assets like electric cars andrefuelling equipment.