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Could your Ltd reduce its corporation tax?

Apr 08, 2017

Could your Ltd reduce its corporation tax? - Latest Advice from Wagner Mason

Do you take any proactive action to reduce the amount of corporation tax your Limited company pays?

Are you making sure that the Limited company is taking all the necessary action to minimise the amount of corporation tax payable:

  • Ensuring all legitimate business expenses are captured (business mileage, cash expenses etc)
  • Any major equipment (capital) purchases planned around the year end are timed to make use of capital allowances
  • Other legitimate business costs re the Directors are considered (e.g. Relevant Life cover, Child care vouchers)
  • Company paying into a pension for the Directors (see below)

If there are sufficient cash/profit in the business after the Directors have extracted what they need in terms of salary/dividends then the company paying into a pension is a good way reducing corporation tax and transferring cash from the Ltd co to the Director. It is worth speaking to a Financial Adviser to get advice on pensions.

The company can pay up to £40k in 2017/18 plus any unused allowances brought forward from the previous 3 tax years.

Case study: Client with highly profitable Ltd and large cash balances and making minimal pension contributions. Met with client pre year end and suggested speak to Financial Adviser about company making an additional pension contribution to Director to make use of unused pension allowances. Ltd paid additional £78k into Directors pension (including using unused carried forward allowances) and saved corporation tax of £15.6k.