“Whatever it will be, is whatever it will be”
The above statement is said by those who accept their fate, and that they believe nothing can be done about the situation that they are in.
And quite often, many taxpayers have the same belief, in that they don’t feel that there was an opportunity to change the amount of tax that is due to be paid.
There are many elements that can be brought into play, and time plays a large part in this.
Before the end of a period, be that accounting year-end or tax year, there are many options that can be considered that are likely to change the tax position. and therefore the tax liability, for either an individual, a business or both.
For example, the timing of buying some equipment, or taking the dividend.
Buying the equipment before the year-end will help to reduce down profits and therefore your tax liability, so this is why it is especially important in the 6-8 weeks before your year-end to contemplate what your plans are in respect to buying large items. However, reducing the profits may not be the best thing, especially if you are requiring larger profits to draw a larger dividend. Planning and mapping out what you are contemplating, and also what you hope the outcomes to be are key to this exercise
The dividend that you are looking to take, especially if you’re coming up to the end of the fiscal (tax) year, could mean the difference of paying the tax due on this either the following January or the one after that. It may (depending on if you’re not fully aware of your businesses financial performance) take you over the amount of profits and reserves available to the shareholders, and put you into a difficult situation in tax terms, even if there is cash to make the dividend payment. The dividend may also push your income into the next tax bracket, and therefore the dividend has become suddenly more expensive.
Being able to plan to do something, and optimise any opportunities is surely better than not doing anything and being left with no opportunities and a situation that could have been changed.
Firstly, it’s always a good idea to have all your financial information up to date before you consider any tax planning, else you’re not working from sold foundations or a known place.
Then you should map out what you are trying to achieve, this may be a personal or a business goal, but writing it down will help to ensure all options are considered.
Then discuss this with your accountant, financial advisor, as they are able to let you know the true implications of your plans, positive or negative.
All in all, it’s all about retaining control over the situations that you can control, before they create a position that you’ve lost the opportunity.