SMALL BUSINESS TAX TIPS

July 26th, 2017

We at Tax Compute help small businesses by providing business solutions that save you time and maximise your profits and reduce your tax bill. We always take full advantage of HMRC allowable expenses and advise our clients accordingly. Below are a few tax tips;

Social functions and parties for employees
You will be exempt from HMRC tax and NI for staff social functions provided;

  1. The cost is £150 or less per head
  2. The event is annual such as a Christmas party or summer barbecue
  3. It is open to all employees
  4. Multiple annual events are also permitted provided the combined cost of the events is £150 or less per head.
  5. Please note that the £150 is not an annual allowance to be set against an amount that exceeds £150.

Company Cars
The tax tips are;

  1. If you purchase a vehicle with low Co2 emissions you can deduct the full cost from your profits before tax.
  2. You can receive a full years allowance for vehicle purchase even if you purchased the vehicle on the last day of your accounting period.
  3. HMRC Benefit-in-kind tax rules are improved for drivers choosing double cab pick-ups as their company car.
  4. It may be tax efficient to use your own private vehicle and claim the approved HMRC business mileage allowances.

Working from home

  1. If you work from home you can claim the cost of office space in your home. This would normally be a proportion based on square footage being utilised for the office versus the total home area.
  2. A percentage of Utility bills can be claimed calculated on a proportionate basis as in 1 above.
  3. Business telephone calls made on the home line can be claimed.

Flat Rate VAT Scheme
You are eligible to join the Flat Rate Scheme if you are a VAT-registered business and you expect your VAT taxable turnover to be £150,000 or less (excluding VAT) in the next 12 months. Certain rules apply and see our full article published in April.

The benefit for small businesses is that you bill your clients at the standard rate of 20% but only pay over to HMRC at the reduced rate depending on your trade. This could be as low as 4%. See HMRC website for details. https://www.gov.uk/vat-flat-rate-scheme/how-much-you-pay

Example for 13.5% rate

Turnover VAT charged to client VAT paid to HMRC Difference = Profit
 50,000  10,000  8,100  1,900
 100,000  20,000  16,200  3,800
 150,000  30,000  24,300  5,700


Author Roger Gunning FCMA CGMA
Tax Compute are Chartered Management Accountants regulated by CIMA. Tax Compute's offices are in Cheltenham and EC2 in the city of London. We are close to Moorgate and Liverpool Street underground stations.