As your business grows and develops, you’re likely to find your accounting becoming more complicated, and the number of taxes and legal obligations you’re required to deal with growing. This is part of business life and being prepared for each stage of your business journey can keep this manageable and running smoothly.
Before we start, when we talk about a ‘tax strategy’, we’re talking about your plan for managing your business taxes – we’re not talking about the formal document (Tax Strategy) which is required to be publicly published by large companies with turn over of £200m or more!
Where Should You Start with Your Business Tax Strategy?
A good strategy will look at every aspect of the business in turn – it will utilise the raw data collected on a regular basis from the business (such as your business returns) and look at the opportunities available (such as different rates and reliefs), whether any important thresholds are being reached (such as VAT), and what opportunities there are when using a projection of growth to plot future actions.
When you break down the various financial elements of your business, you’ll be able to determine whether your spending is appropriate, insufficient, or excessive; a good place to start with your strategy is your expenses.
How much are you spending? What is it being spent on? Do you expect to continue spending the same amount in these areas?
Then you need to look at available reliefs, allowances, or schemes – are they being applied? If they are – is it being done correctly? If they aren’t – was there a reason why not?
After you’ve looked at your incomings and outgoings, you need to look at the dates your books are made up to – are they making the best use of being able to roll certain figures over? Are certain payments or loans, or other financial decisions being done as required – or are they being planned out ahead of time to make the best use of allowances, caps, and reliefs?
Tax can be extremely complicated, especially once you start looking at VAT which requires registration at the £85,000 threshold – although some businesses do choose to register for VAT before reaching this figure as it benefits them to do so.
Likewise, companies that are scaling down, and are no longer at the VAT Threshold may decide that staying VAT registered is the best plan (especially if they’re expecting the dip below to be temporary), or they may determine that it’s in their best (taxable) interests to deregister.
Much of the planning and strategy towards a future plan will depend on the circumstances and financial obligations of your business – there isn’t a one size fits all plan that can be applied, although if you boil it down, it really comes down to – arrange your business, its affairs, incomings and outgoings, obligations, and financial decisions to minimise your tax liabilities.
The UK Tax System is highly complex, and it doesn’t help that it’s not static either – every year new changes are brought in (sometimes multiple times in a year), and new legislative directives are enforced. Just because a plan works in one year, doesn’t guarantee that it’ll continue to work in the next.
If you’re planning to make the best use of the system, and you should be if you’re serious about growing your business, then you need to keep a constant eye on how you’re performing, what thresholds you’re approaching, what reliefs and benefits are eligible to you, and how you go about claiming them.
It’s really not easy, and can take a lot of time, effort, and money to even discover what you need to be looking at. Working with a qualified accountancy service, who are already experienced in these areas, and can directly guide you to the information you need, is much more sensible than trying to go it alone.
At the end of the day, the tax office isn’t going to turn round and tell you that you can save money by doing things differently – they already have the information up on their website, but they expect you to find it, understand it, and action it for yourself.
We, however, will tell you if there’s a more efficient way of planning your finances, and will help guide you through your taxable obligations to ensure you’re only paying the tax that is required. Contact us today and book a consultation – we’ll help determine what you need and provide you with the services to get it done.
