The end of the accounting period for your business is a key point for tax planning. You can save or delay tax by moving income and expenditure between accounting periods.
For instance, advancing the acquisition of assets to just within your current accounting period will mean the capital allowances associated with those assets can be claimed earlier.
All of the cost of qualifying assets which fall within your Annual Investment Allowance (AIA) is relieved as a capital allowance in the year of purchase. The AIA is worth up to £200,000, but it can’t be claimed for the last period the business trades, or by partnerships where a member is a company.
Cars don’t qualify for the AIA, but new cars with CO2 emissions under 76g/km qualify for 100% allowances until 31 March 2018. Thereafter, new cars purchased before April 2021 will qualify for 100% allowances where their emissions are no more than 50g/km. . Charging points for electric cars also qualify for 100% allowances until 31 March 2019.
If you have acquired a commercial property within the last two years, you should check whether the value of the fixtures within that building have been formally agreed with the building’s previous owner. Without this formal agreement you could lose the right to claim capital allowances on those fixtures.
If your current year profits are looking very healthy, you may want to advance the payment of repairs, training costs, bonuses or pensions contributions.
An accrued salary payment, such as a bonus voted before the year-end, is deductible for the period if it is actually paid within nine months after that year-end. However, a pension contribution must be paid within a company’s accounting period to be deductible for that period.
Action Point!
Review spending plans and likely profit levels before your year-end.
