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What to do before 5 April 2012?

Is it that time of year when you should be hearing from your accountant, that’s if you have a proactive one, to explain what you should be doing in preparation for the 5 April 2012 financial year end.

Here are our 5 key tax planning tips to help you save tax:

1.    Is it time to purchase new equipment?

If you make a purchase of qualifying equipment before 6 April 2012 you should be able to write off 100% of the cost against your profit for 2011-12. The current limit is £100,000. The bad news is that from 6 April 2012 this £100,000 limit is being reduced to just £25,000. (There are complications if your trading year end straddles the tax year end. In this case the amount of tax relief you can claim may be reduced.) Accordingly if you are contemplating a significant equipment purchase it would be worth your while to see if savings in tax can be made if you purchase before 6 April 2012.

 2.    Dividends

If you take regular dividends from your company you may want to consider the timing of the dividends you receive in March and April 2012. Dividends voted and paid on or before 5 April 2012 will be taxed in 2011-12, dividends voted and paid on 6 April 2012, a day later, will form part of your income for 2012-13. Everyone’s circumstances will be different but this is a planning exercise that is well worth thinking about. This should enable you to see if you can achieve an overall reduction in tax, or second best, be able to defer tax payments due for a year.

 3.    Annual tax allowances – capital gains tax

You are entitled to tax free gains up to £10,600 during 2011-12. If you have made no chargeable disposals so far this tax year you have until 5 April 2012 to take advantage of this allowance. If you don’t use it, it will be lost. Take a look at your share portfolio and see if you are sitting on any gains that you would be willing to realise. Take care not to buy back shares disposed of as they will likely be caught under the ‘Bed & Breakfast’ rules.

 4.    Employees provided with private fuel

If you have company car users and the company pays for business and private fuel both the company and the employee will suffer a tax charge. These charges can be eliminated entirely if the employee refunds the private element to the employer. The simplest way to do this is provide a log of private mileage and multiply this by HMRC approved fuel rates.

5.    Annual gift allowance – inheritance tax

Have you taken advantage of the £3,000 annual gift allowance? And last year’s if not utilised?

If you have not considered these tax planning options, Nimbus Accounting would be more than happy to discuss the value of applying these tips before the 5 April 2012 cut-off date. 

What to look for in a Xero Accountant?

With more and more accountants realising that they need to offer Xero online accounting software to their clients, what should you be looking for when choosing your Xero friendly Accountant?

If you are migrating to Xero from another accounting package or completely new to Xero, then a modern accountant is what you need. With real time data available in Xero, you need an accountant who will monitor and check your data in the cloud. If your current accountant just produces your year end accounts, then you are not fully utilising the software or benefiting from the enormous power at your fingertips.

You need an accountant with an intimate knowledge of Xero and one you can contact day or night, should you have a question. The service shouldn’t stop there, your Xero accountant should also call you to discuss your Xero data. A Xero accountant should be checking your data as least every month to correct mistakes, look for tax planning opportunities and business growth strategies.

The year end process of completing your accounts for HMRC and Companies House adds no value to your business, unless it is followed up with a meeting with your accountant to discuss the past, present and future. Unfortunately, the fiscal year has finished and many of the potential opportunities will no longer be available – this is typical of the traditional accountancy service. However, modern accountants will have constant contact throughout the year, so when you approach your year end you will be fully informed and will have taken full advantage of tax planning opportunities.

When looking for a Xero accountant, think carefully what you want. Do you want a proactive or reactive accountant?

Nimbus Accounting is at the forefront of a changing industry, we believe that your accountant should be in constant contact, with monthly conversations about your business and tax planning opportunities. The days of seeing your accountant once a year can be a thing of the past, get in touch with Nimbus Accounting today to find out how we can help.