Growing Businesses Suffer From Poor Tax Planning

Recent studies suggest that a high number of growing businesses suffer from poor tax planning. The UK tax system is complex and businesses are advised to seek appropriate tax advice before embarking on significant commercial transactions.

The potential for shocks arising from a lack of tax planning is often high. Examples of poor tax planning include a group of companies facing an unplanned tax bill despite the overall business being loss making. This highlights the importance of understanding the group structure and engaging in appropriate tax planning.

The late submission of tax filings can increase the likelihood of a tax investigation by the HMRC. The new iXBRL tax filing requirements make this more likely this year and companies would be advised to seek an iXBRL solution if they have not done so already.  The importance of seeking good tax advice cannot be underestimated.

Companies can also face exposure to fines if VAT implications are not considered before engaging in a new contract. PAYE compliance is also essential. The move to the new RTI system will be an important factor to be addressed by most payroll departments in the UK.

Larger companies must also comply with the relevant transfer pricing regulations and must ensure they have an adequate management fee structure in place. Failure to do so can result in significant fines for the business. Unless appropriate advice is received early on, businesses can find themselves having to hire expensive advisors and interim contractors to resolve last minute issues and prepare the necessary filings.

Other examples of poor tax planning include a business or individual not utilising all of the reliefs available to them. In one extreme case we came across the story of an individual who received poor tax advice and had not utilised all of his personal allowance when operating his payroll via a limited company. The individual received a poor service from inexperienced staff employed by his accountant.

We recommend that new businesses seek appropriate tax advice where necessary to avoid any expensive mistakes. At Belsize Accountancy, all tax computations are reviewed by an experienced Qualified Accountant before they are finalised in order to ensure we provide a high standard of service to our clients.