Business owner tax planning tips for February

Businesses operating via limited companies on the island will have many issues to consider and it is not possible to list them all. The first point to mention is that business decisions should be taken for commercial reasons and generally not driven by tax motives. However, tax can be very relevant and here are just a few considerations (there are many more):

Most (but not all) trading entities are taxed at a zero rate and so tax becomes relevant when the shareholders are paid dividends. Deferring dividend payments into future tax years can mean deferral of a tax liability to the future.

Group structures – this can be a problematic subject but if, for example, you own one profitable trading company and one loss making company then restructuring may save you tax as an owner.

Land development tax holiday – if relevant are you taking advantage?

Tax cap election – high earners should consider whether they should apply for this status.

Exempt benefits in kind – non cash benefits received by directors/employees are generally taxable. However, there are some exemptions (conditions may apply) which include: electric cars (not hybrid), personal computers/devices <=£1,000, mobile telephone, plant and machinery where used for the business and many more!

Are you claiming all the expenses for the business that you can? For example, if you use your private car for business purposes or have a dedicated room at your home for the business.

Sole traders are taxed differently and pay tax on all profits whether extracted or not. Investing in new plant or equipment in the current accounting period rather than the future can reduce short term tax liabilities at the expense of the longer term.

From a Manx personal tax perspective make sure you claim on your tax return for what you are entitled to. For example: charitable donations, private medical insurance (aged 60+), qualifying nursing expenses, professional subscriptions, qualifying loan interest paid, IOM pension contributions, double tax relief and more!

Please do take advice before acting as conditions may apply and the above is not comprehensive. For further information please contact us emai@hardinglewis.com.