creative ways to reduce tax on business profits

mubeye

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?

Wayne_O_Mac

mubeye wrote: »

ideally by increasing 'expenses'

Why did you put inverted commas round 'expenses'? Because it looks like you're hinting at committing fraud.

anselld

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

Get hooked up to a really expensive, top class escort service and that should chew up your £10k pronto.

mubeye

Wayne_O_Mac wrote: »

Why did you put inverted commas round 'expenses'? Because it looks like you're hinting at committing fraud.

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.

agrinnall

mubeye wrote: »

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.

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

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

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?

MoneySavingUser

mubeye wrote: »

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?

As you mention dividends it must be a limited company.

anselld wrote: »

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?

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

MoneySavingUser wrote: »

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!

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

Next time you want to study have the company pay the fees. How about an immersion-in-French course in Paris?