My boss has received his tax bill and as usual is ever so slightly miffed. It appears even though he tried many "tax avoidance" schemes, he has managed to stray into the 40% bracket, this makes for a grumpy boss, (I won't go into how he believes he has paid enough tax ).
Of course everything got blamed on the accountant being far too cautious, rather than as I believe being very protective. As we discussed this over the day it transpired that one of the partners would prefer to throw caution to the wind, change accountants and go full bore tax avoidance. My boss however would prefer to know leading up to the end of the financial year what he can do to stop hitting the the dreaded 40% bracket, (this has become like a line drawn in the sand that he never wants to cross).
So the question has to be what can be done? I can to an extent, (given the time, something that is a precious resource at the moment), give him a reasonable idea of where he stands from the business profits, (or losses). However there is a lot more involved from income from other sources and of course rulings on capital allowances etc, all things I really don't have the time to research.
My suggestion was to start getting accounts done quarterly, so by the third quarter he will have a good idea where things are heading as trade in the third quarter is reasonably predictable. Is this something that is done by other businesses? Or is it a waste of time? If so what would you suggest?
This is something that we did a lot of. But this was for people with a lot higher income. We would then suggest capital expenditure and such to bring the liability down. However, if he is only just going into the bracket, the "saved tax" may be offset by higher accountancy fees.
Not much of an answer i know, but it also depends on the type of business. Some businesses do not lend themselves to doing things to reduce a tax bill.
Nick
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Nick
Nick Craggs FMAAT ACA AAT Distance Learning Manager
I think you have both hit the nail on the head there. Basically he is a miser , and after I suggested quarterly accounts, which he was very interested in, I then mentioned the increased cost, I'm almost sure a little part of him died inside .
I don't think I have anywhere near the knowledge to start giving accurate forecasts, however I have enough to give rough guesstimates.
I think I may suggest giving me more time to train, as I feel I could do this with a bit more time. What do you think? Is it beyond the realms or doable?
I'd just bear in mind that if the accountant is getting the blame now (when its very possible he has done all he can without blatantly committing fraud!), who is going to get the blame if you are responsible for the forecast?? I assume he wouldn't be willing to pay for some decent training?? Only consider it, if there is some real advantage to you.. otherwise it might be best to let him find an tax specialist who will do some serious tax planning for him...
I'd just bear in mind that if the accountant is getting the blame now (when its very possible he has done all he can without blatantly committing fraud!), who is going to get the blame if you are responsible for the forecast?? I assume he wouldn't be willing to pay for some decent training?? Only consider it, if there is some real advantage to you.. otherwise it might be best to let him find an tax specialist who will do some serious tax planning for him...
Aye he's a miser so it would be me who would be paying :)
Thinking on, one of the partners would stitch up his own mother to save himself going to jail so I'm best off well out of it.
I'll stick to book keeping for now and not worry about someone's tax bill, thanks for the advice.
If he is a Ltd Co. can't he pay himself up to the 40% bracket in salary/dividends and keep the retained profits for a bad year?
It's a partnership otherwise he would be doing this, anything to avoid tax as he has paid enough and so have his children apparently :) Unlike the rest of us.
He could increase his staff wages, reduce his profits and reduce his taxable profits. Has the added benefit of resulting in a happy workforce.
In all honesty, there isnt any point in doing any seriously tax planning unless his taxable profits are say £100k+ where the fees for doing the work would justify the tax saving.
Tell him he just has to pay his due amount.
Lots of people think there are great schemes and whizzes they can use to reduce their tax liability when in most cases for joe public there isnt much.
He could increase his staff wages, reduce his profits and reduce his taxable profits. Has the added benefit of resulting in a happy workforce.
In all honesty, there isnt any point in doing any seriously tax planning unless his taxable profits are say £100k+ where the fees for doing the work would justify the tax saving.
Tell him he just has to pay his due amount.
Lots of people think there are great schemes and whizzes they can use to reduce their tax liability when in most cases for joe public there isnt much.
Mark
And there it is. He seems to think that the accountant should be doing more, when there is nothing more to be done, unless they see the books before year end.
That said though does not the accountant send a monthly or bi monthly news sheet that tells businesses about various schemes and asks those in receipt of the newsletter to get in touch to discuss matters that they feel may affect them?
Many of the matters in the newsletters refer to VAT and Corporation tax but there will generally be to odd snippet in relation to reducing personal taxation by such options as increased pension contributions, use of SIPP's, etc.
Not all tax advice from the accountant has to be expensive. For example, the Government refund into the SIPP account whilst non accessible would on (say) a £10k or even a £2k investment more than cover the fee's for simple advice like that.
If business owners don't read the newsletters then its hardly the accountants problem.
just my tuppenth worth,
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
That said though does not the accountant send a monthly or bi monthly news sheet that tells businesses about various schemes and asks those in receipt of the newsletter to get in touch to discuss matters that they feel may affect them?
Many of the matters in the newsletters refer to VAT and Corporation tax but there will generally be to odd snippet in relation to reducing personal taxation by such options as increased pension contributions, use of SIPP's, etc.
Not all tax advice from the accountant has to be expensive. For example, the Government refund into the SIPP account whilst non accessible would on (say) a £10k or even a £2k investment more than cover the fee's for simple advice like that.
If business owners don't read the newsletters then its hardly the accountants problem.
just my tuppenth worth,
kind regards,
Shaun.
In short, it is a small family run business and I have never seen a newsletter, however they did ring me up before RTI to make sure I was ready for it which was nice.
Switch to a limited company is the obvious suggestion, to get rid of all that horrible national insurance, enable dividends to be carefully timed etc....but I'm guessing there are reasons that the business is set up as a partnership and they may, or may not, have an influence on whether or not this is a viable option??
I know it sounds like a daft question but does he actually realise he doesnt pay 40% on eveything? I only ask - as some people think you do!!
One of mine hit the 40% bracket recently and would clearly benefit from putting contributions to a pension as they havent got any future financial planning in place, but they are in need of lots of cash (live an expensive lifestyle / high maintenance to ex wife etc) - cant win all of the time.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Switch to a limited company is the obvious suggestion, to get rid of all that horrible national insurance, enable dividends to be carefully timed etc....but I'm guessing there are reasons that the business is set up as a partnership and they may, or may not, have an influence on whether or not this is a viable option??
This was something that got discussed. They are also looking at separating the two parts of the business, if that happens I will be asking for more money :)
I know it sounds like a daft question but does he actually realise he doesnt pay 40% on eveything? I only ask - as some people think you do!!
One of mine hit the 40% bracket recently and would clearly benefit from putting contributions to a pension as they havent got any future financial planning in place, but they are in need of lots of cash (live an expensive lifestyle / high maintenance to ex wife etc) - cant win all of the time.
I did mention this, he has a problem paying 40% to the tax man on anything, or 20 % for that matter :)
).
, and after I suggested quarterly accounts, which he was very interested in, I then mentioned the increased cost, I'm almost sure a little part of him died inside 
.
I'd just bear in mind that if the accountant is getting the blame now (when its very possible he has done all he can without blatantly committing fraud!), who is going to get the blame if you are responsible for the forecast?? I assume he wouldn't be willing to pay for some decent training?? Only consider it, if there is some real advantage to you.. otherwise it might be best to let him find an tax specialist who will do some serious tax planning for him...
