Business year end reviews, I hope, are common place throughout the calendar year, but are particularly prevalent around 31st March/30th April period. There is an argument that they take on greater significance around now on the basis that they broadly coincide with the tax year end and, therefore, the decisions made for the business could have a wider implication for the individuals involved in the business. I personally would argue that where relevant, I would always want to see the impact business year end review decisions have on affected individuals.
Here are just some areas I would want to consider when carrying out such a review. The priority of those mentioned here is dependent upon the client’s particular situation.
1. Approaching a year end, if there are reserves within the company, I would ask if the client wants to extract monies. If so, what would be the split between bonus, dividend, pension and benefits and between whom? Quite often there is mishmash of extraction methods where I would hope to provide a report on how that impacts upon the company and the individuals concerned.
2. Is the company carrying out any R&D work? If so, was that the case in the previous two accounting periods and has a claim been made for those prior years?
3. Is there a patent in place? Should a patent box election be made to benefit from the 10% corporation tax rate? Is the patent pending or should they apply for a local patent?
4. If the client is looking at purchasing plant and machinery before the year end will they be able to avail themselves fully of the annual investment allowance? How will the transitional rules affect that position where the accounts year end straddles 1st January 2019?
5. If it is an unincorporated business should it be incorporated? If so, how would the corporate structure look? Is there any ‘free’ goodwill? Is it worthwhile disclaiming incorporation relief to draw on that goodwill?
6. Is the accounting year end other than 31st March or 5th April? Are profits falling? What is the overlap/transitional relief position? Is it worth changing the year end to make use of that relief?
7. Regarding partnerships and LLPs, are they complying with the anti-avoidance legislation brought into play in the Finance Act 2014 in respect of ‘salaried’ members and mixed partnerships?
There are many other considerations to take into account but that will do for now.
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