9 Small Business Healthcheck Matt Haines,


Assistant Manager, Business Services


When ‘tax planning’ is mentioned, the first thing which comes to mind can often be complex business structures involving foreign companies, but for smaller concerns (and indeed some larger), a lot of simple things can be done in order to maximise tax relief for both you and your business.


Below are a couple of areas we have been finding relevant to owner managed businesses.


Mobile phones


By ensuring that employees’ (including directors) mobile phone contracts are taken out in a company name, the full cost of both the service charge and calls/ data usage is tax deductible and outside of the benefit in kind regime. Smartphones are also covered by this exemption.


Tax-efficient salary


Directors of owner-managed companies can mitigate both national insurance and income tax by paying themselves a salary below the Lower Earnings Limit and the Earnings Threshold. An amount of £7,488 for the current tax year to 5 April 2013 will achieve a qualifying


year towards the individual’s state pension and, assuming the director has no other income, will not create a tax or national insurance liability. Assuming available, company profit reserves can be distributed via dividends in order to top up income; this avoids national insurance altogether and income tax up to the individual’s basic rate band (£34,370 in 2012/13).


Annual parties


The cost of staff parties, when available to all employees, is an allowable business expense up to an annual limit of £150 per person. When considering the number of people attending the event, HMRC allow both employees and members of their household (also attending) to be taken into account. Remember that this amount is not an allowance to deduct from the total cost of parties in the year so if the cost of one party exceeds the £150 per head limit the full amount is disallowable for tax. It is possible to consider several staff functions throughout the year and apply the exemption appropriately to ensure it is not breached and the maximum relief is achieved.


The above should always be discussed with your business adviser before implementing to ensure that the wider impact on both your business and personal affairs is considered.


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