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  • FIRST POST
    • mubeye
    • By mubeye 12th Mar 17, 7:31 PM
    • 76Posts
    • 8Thanks
    mubeye
    creative ways to reduce tax on business profits
    • #1
    • 12th Mar 17, 7:31 PM
    creative ways to reduce tax on business profits 12th Mar 17 at 7:31 PM
    I have about 10k a month profit coming out of a business have no immediate need for. Any ideas what I can do to reduce tax,ideally by increasing 'expenses', presuming i might want to get the cash in 5 or 10 years. Should i just take as dividend? understand buying property is not tax deductable. What could i spend the cash on that isn't spend for sake of spend?
    Last edited by mubeye; 12-03-2017 at 10:25 PM.
Page 1
    • Wayne O Mac
    • By Wayne O Mac 12th Mar 17, 9:06 PM
    • 174 Posts
    • 225 Thanks
    Wayne O Mac
    • #2
    • 12th Mar 17, 9:06 PM
    • #2
    • 12th Mar 17, 9:06 PM
    ideally by increasing 'expenses'
    Originally posted by mubeye
    Why did you put inverted commas round 'expenses'? Because it looks like you're hinting at committing fraud.
    • anselld
    • By anselld 12th Mar 17, 9:33 PM
    • 5,094 Posts
    • 4,620 Thanks
    anselld
    • #3
    • 12th Mar 17, 9:33 PM
    • #3
    • 12th Mar 17, 9:33 PM
    The good thing about tax is that you only pay it when you make more profit/income. It is completely pointless to generate extra expense just so you save a fraction of that expense in tax!

    Have you paid out dividends at least £5k to shareholders?
    Pay employer pension contributions?
    Employ spouse, children, etc (in meaningful roles)?
    Donate to charity?
    • chrismac1
    • By chrismac1 12th Mar 17, 10:14 PM
    • 2,394 Posts
    • 1,404 Thanks
    chrismac1
    • #4
    • 12th Mar 17, 10:14 PM
    • #4
    • 12th Mar 17, 10:14 PM
    Get hooked up to a really expensive, top class escort service and that should chew up your £10k pronto.
    Hideous Muddles from Right Charlies
    • mubeye
    • By mubeye 12th Mar 17, 10:24 PM
    • 76 Posts
    • 8 Thanks
    mubeye
    • #5
    • 12th Mar 17, 10:24 PM
    • #5
    • 12th Mar 17, 10:24 PM
    Why did you put inverted commas round 'expenses'? Because it looks like you're hinting at committing fraud.
    Originally posted by Wayne O Mac
    Haha, sorry yes I didn't mean it quite like that. I was thinking more along the lines of creative ways to reinvest the money in the business rather than just extract the cash. Renting a better office, expanding or hiring new staff are safe options, but these are a bit boring, so was wondering if there are any more creative ideas or 'expenses' for when a business has surplus cash.
    Last edited by mubeye; 12-03-2017 at 10:38 PM.
    • agrinnall
    • By agrinnall 13th Mar 17, 10:05 AM
    • 17,261 Posts
    • 12,932 Thanks
    agrinnall
    • #6
    • 13th Mar 17, 10:05 AM
    • #6
    • 13th Mar 17, 10:05 AM
    Haha, sorry yes I didn't mean it quite like that. I was thinking more along the lines of creative ways to reinvest the money in the business rather than just extract the cash. Renting a better office, expanding or hiring new staff are safe options, but these are a bit boring, so was wondering if there are any more creative ideas or 'expenses' for when a business has surplus cash.
    Originally posted by mubeye
    as anseld has pointed out, simply spending more money in order to reduce profits when there is no need for that spending is cutting off your nose to spite your face. If there is a business justification for the spend then go ahead, otherwise you are just wasting money on fripperies.
    • sheramber
    • By sheramber 13th Mar 17, 10:28 AM
    • 3,081 Posts
    • 2,379 Thanks
    sheramber
    • #7
    • 13th Mar 17, 10:28 AM
    • #7
    • 13th Mar 17, 10:28 AM
    Surplus 10,000 less tax at 20% leaves you £8000

    spend 10,000 on allowable expenses means you no longer have your 10,000 to gain £2000 tax relief.

    Unless that expense is necessary that is not a money saving strategy
    • uknick
    • By uknick 13th Mar 17, 10:36 AM
    • 599 Posts
    • 257 Thanks
    uknick
    • #8
    • 13th Mar 17, 10:36 AM
    • #8
    • 13th Mar 17, 10:36 AM
    OP

    Are you serious? You have a business generating pre tax (I assume pre-tax from your post as you're asking how to reduce the figure by spending more) profits of £120k each year and are asking what to do with them.

    Don't you have any business advisers on retainer at that level of business?
    Last edited by uknick; 13-03-2017 at 10:40 AM. Reason: Removed question about Ltd company
    • MoneySavingUser
    • By MoneySavingUser 13th Mar 17, 11:34 AM
    • 1,589 Posts
    • 637 Thanks
    MoneySavingUser
    • #9
    • 13th Mar 17, 11:34 AM
    • #9
    • 13th Mar 17, 11:34 AM
    I have about 10k a month profit coming out of a business have no immediate need for. Any ideas what I can do to reduce tax,ideally by increasing 'expenses', presuming i might want to get the cash in 5 or 10 years. Should i just take as dividend? understand buying property is not tax deductable. What could i spend the cash on that isn't spend for sake of spend?
    Originally posted by mubeye
    As you mention dividends it must be a limited company.

    The good thing about tax is that you only pay it when you make more profit/income. It is completely pointless to generate extra expense just so you save a fraction of that expense in tax!

    Have you paid out dividends at least £5k to shareholders?
    Pay employer pension contributions?
    Employ spouse, children, etc (in meaningful roles)?
    Donate to charity?
    Originally posted by anselld
    In which case my vote goes to employer pension contributions. Are you married? make your wife a director and pay contributions for her too.

    Also don't forget to use some of these! https://www.gov.uk/government/collections/tax-avoidance-schemes-currently-in-the-spotlight

    P.S. Get a better accountant!
    • mubeye
    • By mubeye 13th Mar 17, 4:17 PM
    • 76 Posts
    • 8 Thanks
    mubeye
    As you mention dividends it must be a limited company.

    In which case my vote goes to employer pension contributions. Are you married? make your wife a director and pay contributions for her too.

    Also don't forget to use some of these! https://www.gov.uk/government/collections/tax-avoidance-schemes-currently-in-the-spotlight

    P.S. Get a better accountant!
    Originally posted by MoneySavingUser
    Pensions and wife. Yeah but can't quite bring myself to commit to either.....

    I'm not really sure what to expect from an accountant in my niche (ecommerce). Other than calculating corportation tax, what really does a good one offer more?
    • kidmugsy
    • By kidmugsy 13th Mar 17, 4:45 PM
    • 9,202 Posts
    • 6,023 Thanks
    kidmugsy
    Next time you want to study have the company pay the fees. How about an immersion-in-French course in Paris?
    • TheCyclingProgrammer
    • By TheCyclingProgrammer 13th Mar 17, 9:18 PM
    • 2,414 Posts
    • 1,352 Thanks
    TheCyclingProgrammer
    Next time you want to study have the company pay the fees. How about an immersion-in-French course in Paris?
    Originally posted by kidmugsy
    You'll be taxed on the benefit so don't really see the advantage in this, if you're being serious.
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