Whether related to income, property or other business transactions and even upon death, it seems for many that the payment of tax is fait accompli. Often through ignorance, poor professional advice or just a simple resignation to the inevitable, many may be missing out on the opportunity of paying less in tax to the Chancellor.
The essence of effective tax planning focuses on the need to be proactive and identify a pending tax liability before it is too late to mitigate. For a business knowing it is to undertake a business transaction or deal, putting into place tax planning strategies will help to minimise potential tax liabilities.
With on going, subtle, changes to tax legislation, undoubtedly necessitates the need for advice from professional advisers. DIY tax planning tends not to achieve the desired effect and ultimately is more costly than seeking the correct advice.
Certain tax planning techniques can be classed as pushing the boundaries in terms of their acceptance by HM Revenue and Customs (HMRC). It is always recommended that you have in place the pre-requisite paper trail and keep all records, it is much easier for you and your adviser to support submissions with HMRC if required to.
It may be surprising but the ability to reduce, and in some cases, totally mitigate a tax liability does not always revolve around complex tax instruments. Often simple steps, without a great cost, can when combined often have a significant impact.
Ensuring all allowances are correctly claimed and remuneration, is tax efficient are two key areas to focus on. Often overlooked are the opportunities around use of pension contributions, payments of bonuses, dividend payments and tax free benefits in kind.
For Higher Rate Tax payers there are a host of ideas worth considering including the use of Venture Capital Trusts (VCTs), Enterprise Investment Schemes (EISs) and Enterprise Zone Trusts (EZTs).
For businesses, there are definitely potential tax saving ideas to be gained from by reviewing your year-end planning. Savings can be attained by considering whether to defer income, advance expenditure and group arrangements.
In summary, paying tax need not be taxing and it can undoubtedly be more a voluntary payment than compulsory demand.
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