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FAQs

Q1. How are a company's profits subject to double taxation and how can this effect be mitigated?
A1. Successful companies make profits and are accordingly subject to corporation tax at effective rates of between 32.5% and 20%. The rates will be changing over the next three years, with the main rate reducing from 30% to 28% in April 2008. The higher marginal rate will also reduce progressively to 29.5% by April 2009. Corresponding with the reduction in the main rate for each year from April 2007 the lower rate of corporation tax applicable to smaller companies will increase by 1% a year from 19% at present, until April 2009 when it reaches 22%. For most profitable average sized owner managed companies there will be opportunities to bring the rate of tax down to lower small companies rate.

If an owner of a company wishes to extract funds from the company or realise their investment in it, this will normally be subject to taxation at some point before being received in shareholders' hands. Hence there is a double charge to taxation on the retained value in the company's shares.

There are a number of ways of substantially mitigating and possibly eliminating the double tax effect.

Structuring your remuneration package correctly can help to effeciently minimize the tax effects of extracting funds and meet your circumstances, maximising the money in your hands.

By looking at the circumstances of the investment you have in your company, and by taking action now, we may be able to advise you how to reduce or defer looming tax bills.

Q2. Are you making the most of your tax allowances on capital investments?
A2. Investments in business assets to generate future income is an important decision for most entrepreneurs and small companies.

Tax allowances can play an important part in mitigating the initial outlay, and there are a number of tax efficient ways of arranging finance for such purchases to suit your companys circumstances. Let us help you invest for the future and ensure you make the most of:

Research & Development - 150% allowance or a tax credit

First year allowances on investment in plant - at between 50% and 40%

100% first year allowances on a number of environmentally friendly cars with low CO2 ommissions.

Investment in energy and water saving plant equipment - 100%

The Chancellor recently announced a significant overhaul of the capital allowance system, phasing out the industrial buildings and agricultural buildings allowances and proposing to bring in 100% allowances for the first £50,000 of expenditure on plant and machinery from April 2008.

Have your accountants claimed your full entitlement?

All of the above allowances are subject to detailed definitions and legislation, and you should not assume your company meets the criteria. The terms of purchase contracts can also effect the timing of allowances significantly, especially if payment terms are such as to defer payment by more than four months. You need to consult tax professionals on this matter.

Q3. Is my company paying too much tax?
A3. There are many ways that companies can arrange their affairs to minimise their exposure to corporation tax which can be levied at as high a level as 32.50% on profits or as low as 20%. There is no substitute for a comprehensive pre year end tax review taking account of all your company's circumstances and the requirements of its shareholders and managers.

If your company is experiencing the ill wind of recession is it planning to utilise any tax loss efficiently to aid recovery and a return to profitability.

By planning your tax affairs we can save your company money!.