Gordon’s Green Light for Tax Planning

With the government now well into their second term, it is worth considering what tax planning opportunities can be exploited by small businesses.

Whilst there have been no dramatic changes recently to small company taxation the last budget did continue the trend of rewarding successful owner-managed companies.

Recent budgets have included a maximum 10% Capital Gains Tax rate for owners selling a business that has been going for more than two years, a 0% Corporation tax rate on the first £10,000 of profits and 100% capital allowances on IT and communications equipment. Whilst they have also introduced a clampdown on so-called personal service companies (those with only one customer and trade similar to that of employment) they have allowed tax-saving techniques for small trading businesses to flourish. As a result most small businesses will pay less tax as a limited company than they would as a sole trader although taxpayers should take advice on their own unique circumstances.

For growing businesses the last budget extended the scope of the Enterprise Management Incentive Scheme. Other tax planning tools used by small business such as Self Invested Pension Plans (often used to buy commercial property) and Employee Benefit Trusts were also ignored throughout the whole of the last parliament.

There can only be one conclusion. The Treasury has decided to put its full weight into closing loopholes that can be exploited by only the wealthiest taxpayers whilst giving the green light to small businesses to arrange their affairs in a highly tax-efficient way.

For the well-advised business, good planning still pays.