Latest stories have put HMRC within the highlight, revealing irritating delays that imply some enterprise house owners are ready greater than 4 months to obtain a refund on their overpaid tax.
For a lot of small companies, this isn’t simply an inconvenience. It will probably create severe cashflow issues, which might pressure day-to-day operations and hinder progress.
The neatest solution to keep away from delays – and extra importantly, to maintain your hard-earned cash working for you – is to make sure you’re not overpaying tax within the first place.
Right here, Tom Biggs breaks down three key methods that can assist you keep away from this example in what you are promoting.
1. Hold correct information
One of many largest pitfalls small enterprise house owners fall into is getting swept up within the day-to-day and neglecting their bookkeeping.
Given the UK’s tax code is likely one of the most intricate on the earth, making overpayments is a simple mistake to make, however this may be minimised by sustaining organised and correct monetary information. With out doing so, it’s unimaginable to accurately calculate tax liabilities and substantiate any deductions or credit claimed.
It will probably additionally lead to fines from HMRC if tax returns are submitted with errors, which causes the other downside of needing a refund.
Making certain you adjust to tax rules and deadlines can also be important to keep away from curiosity expenses and penalties for late submitting or underpayment. Implementing sturdy accounting processes will assist you hold correct information, which is able to make the tax return course of considerably simpler and imply you keep away from overpaying tax.
2. Plan strategically (and proactively)
Leaving your tax return to the final minute means you don’t have time to plan successfully and may result in overpayment of tax on account of incorrect calculations. Proactive tax planning all year long means you will have a clearer headspace to maintain correct information, and you’ve got extra time to determine tax-saving alternatives.
This may contain altering the timing of earnings and bills, discovering the optimum authorized construction for the enterprise, or benefiting from tax-advantaged retirement plans. As an example, Company Tax is charged on a sliding scale relying on a enterprise’ taxable revenue. So, by strategically planning, you can scale back the enterprise’ taxable revenue to lower the quantity of Company Tax owed.
A certified tax advisor may help you develop and implement a tax technique tailor-made to what you are promoting’ particular circumstances.
3. Maximise your allowable deductions and credit
Tax deductions scale back a enterprise’ tax legal responsibility by deducting sure bills from its revenue. These bills are typically issues that make it potential to maintain the enterprise, equivalent to operational prices like lease and utilities, investments in tools and analysis, or PR and advertising prices. In follow, which means if a enterprise has a taxable revenue of £100,000 however has £20,000 value of allowable bills, the precise taxable revenue could be £80,000.
There are additionally tax credit to contemplate. These work in another way from deductions as they immediately scale back the quantity of tax owed, reasonably than the pre-tax revenue. There are a number of varieties of tax credit accessible for various industries, together with R&D tax credit scores and the Annual Funding Allowance (AIA). These act as incentives for companies to spend money on sure areas to qualify for a reduction on their tax invoice. However be warned, they’re continually altering and have sophisticated qualifying standards, so it’s essential to seek the advice of a tax professional earlier than starting any claims.
Ultimate ideas
Navigating the complexities of the UK tax system as a small enterprise proprietor can really feel like a minefield, however overpaying on tax doesn’t must be inevitable.
By prioritising record-keeping, embracing proactive and strategic tax planning all year long, and exploring accessible deductions and credit, companies can considerably scale back their tax liabilities and their probability of overpaying tax.
Not solely will this keep away from frustration with prolonged refund waits, but it surely may scale back your general tax legal responsibility from the outset to contribute to the general monetary well being and stability of what you are promoting.
Learn the way Wellers can help together with your strategic tax planning.
Ercan Demiralay is companion on the small enterprise accountancy agency, Wellers.
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