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8 | Year-End Tax Guide 2017/18
BUSINESS DEDUCTIONS
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.
However, deductions in the form of capital allowances
are available for some expenditure on qualifying
capital expenditure.
PLANNING
Directors' bonuses can be claimed as an in-year
deductible cost so long as they are paid within nine
months after the company year-end.
Pension contributions must be paid before the year-end
to get tax relief in the accounting period.
Salaries can be paid to family members as long as they
are justiiable and at commercial rates.
Other potentially tax-eficient ways of extracting proits
include dividends and beneits in kind.
ENTREPRENEURS’ RELIEF
Entrepreneurs' relief provides relief for disposals by
smaller business owners.
It charges a reduced CGT rate of 10% on disposals up
to the lifetime limit of £10 million, giving a potential tax
saving of up to £1 million.
The relief is available on material disposals of business
assets, which cover businesses operating as a sole
trader, partnership or through a limited company.
It may not be available when a company is liquidated if the
owner is involved in a similar business (whether a company,
self-employment or a partnership) after the liquidation.
PLANNING
CGT liability is just one aspect of all the planning that goes
into the wording of the inal 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 several planning opportunities in this area, but
there are also pitfalls if some shareholders do not qualify for
this relief.