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BUSINESS DEDUCTIONS
Basics
Business owners are entitled to claim deductions from income for costs which are incurred wholly and exclusively in running
the business.
Determining how this rule applies in practice can be a challenge. In most circumstances, a deduction may not be claimed
in respect of depreciation, but deductions in the form of capital allowances are available for some expenditure on qualifying
capital expenditure.
Planning
• Have you recorded all your costs?
• Directors’ bonuses can be claimed so long as they are paid within 9 months after the company year-end but pension
contributions must be paid before the year-end to get tax relief in the accounting period.
• Salaries can be made to family members as long as they are justi"able and at commercial rates.
• Other ways of extracting pro"ts include dividends and bene"ts in kind.
ENTREPRENEURS’ RELIEF
Basics
Entrepreneurs’ relief provides relief for disposals by smaller business owners. It charges a reduced tax rate of 10% on
disposals up to the lifetime limit of £10 million giving rise to a potential tax saving of up to £1.8 million.
The relief is available on material disposals of business assets which covers businesses operated as a sole trader, partnership
or through a limited company.
Planning
The liability to capital gains tax is just one aspect of all the planning that goes into the wording of the "nal contract for sale.
Maximising the sale value and looking carefully at the proposed sale structure helps to ensure the liability to capital taxes
is not a penny more than absolutely necessary. There are a number of planning opportunities in this area but there are also
pitfalls if some shareholders do not qualify for this relief.
Business Taxes, Allowances and Reliefs
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