Many companies’ accounting periods are aligned with calendar year. A few simple planning tips implemented before 31 December 2017 can ensure that these companies can accelerate corporation tax relief and reduce their corporation tax liability due for the current year.
- Accelerate capital expenditure
Each company and its associated companies share an annual investment allowance (AIA) of £200,000. Expenditure on qualifying assets (plant and machinery, equipment and fixtures) up to this amount in an accounting period will qualify for 100% tax relief. Planned capital expenditure should be accelerated before year end to ensure that tax relief is claimed as early as possible.
Declare any bonuses that are due payable at year end and ensure that these are documented and accrued in the year end accounts. Where there is an obligation to pay the bonus as at the balance sheet date, corporation tax relief can be claimed on the bonus amount so long as it is actually paid through the payroll within 9 months of the year end.
- Pension contributions
Corporation tax relief for employer pension contributions is given in the accounting period in which they are paid. Where possible directors should ensure that contributions are paid before the year-end to accelerate the tax relief.
- Review claims and elections
A review should be undertaken pre-year end to ensure that all available tax relief claims and elections have been claimed, especially those where the time limit for a claim may end on 31 December. Such claims may include loss relief claims, R&D tax relief claims for prior periods, group relief claims etc.
- Provisions and accruals
Appropriate provisions and accruals should be documented and included in the year end accounts to ensure corporation tax relief is claimed as early as possible. Such amounts may include provisions for obsolete stock or provisions against bad debts.
If you would like to discuss any year end planning opportunities, please contact one of the team at Corrigan Associates.