Reducing Corporation Tax - How do the Big Firms do it?

gazhawkins

Treat your company to a Mini Cooper Diesel 1.6 (or any other car with emissions<120g/km) before March 2008 and you can write off the whole of your 11 grand corp tax bill.

You'd still have a benefit in kind annual tax of about 1800 quid a year to pay, but what the hell?

Get an employee to contribute 5 grand to the cost of the vehicle and the annual charge will come down considerably.

dejongj

Well if you were able to distribute dividends you did not really break even did you If I were to follow that reason my company always breaks even Divi's should only be declared if there is enough profit in the company and it does not adversely effect the running....

Anyway I like the Mini Cooper Diesel idea! Wonder whether the Honda Hybrid falls in that category or did it has to be a car below 12k? And below 120g/km

dejongj

Just noticed that the 12k barrier does not count for <120g/km type cars which is great....

But unfortunately I think there may be a flow in the plan, the existing bill can't be lowered can it? I mean if that bill is a result of divi declarations that it already includes tax that is due no matter what you do in expenditure after that point.....

So in order to do this, if I understand it correctly, you can declare £11k less in divi's, then gain a personal tax bill of £1800 per year unless you do a personal contribution....Hmmm I guess I won't go to a green car, pay out the divi's and keep driving my nice BMW 4.4V8 7 series which nowadays only costs £1800 to buy second hand and get the mileage....Seems a much better way to keep money in my pocket...Nice idea though...

matty_art

Lazy_Runner wrote: »

With the AA and Saga, it seems they paid no tax because the private equity groups that bought them, made them take on massive loans. As like any other business, the interest payments on a loan can be set against profits.

More details here:
http://news.bbc.co.uk/1/hi/business/6263866.stm

I would have thought that this would fall foul of loan transfer pricing rules i.e. any interest paid on loans from group companies that is over the normal market interest rate of debt, and over the normal amount of gearing (i.e. percentage of debt compared to equity) for the market sector is disallowed for tax purposes...

I suppose they can get away with increasing the interest payments by a certain amount though.

robert_harper_2000

So what happens to the profits?

If I spent out on energy saving equipment Solar panels or insulation then would it literally mean we don't pay out the £11k tax? Does it actually come out of that ??

gazhawkins

robert_harper_2000 wrote: »

So what happens to the profits?

If I spent out on energy saving equipment Solar panels or insulation then would it literally mean we don't pay out the £11k tax? Does it actually come out of that ??

If solar panels/insulation are tax deductable then yes. The mini cooper purchase I mentioned is a similar thing.

However, you're still spending 11k of your company's money - whichever way you're looking at it.

It's only worth investing in this sort of thing - if you were going to buy them anyway - the tax deducted is a major bonus.

dejongj

robert_harper_2000 wrote: »

So what happens to the profits?

If I spent out on energy saving equipment Solar panels or insulation then would it literally mean we don't pay out the £11k tax? Does it actually come out of that ??

I don't think that would a correct assumption but your accountant would know better. If you have a current CT liability due to declared profits and distribution of dividens then it is already too late to do something about that......That £11k is money you already owe, you need to make the purchase before you declare the profits and distribute dividends....Thus declare less profit, less dividends and less CT due, but you do get the toys....