Many business owners will have complex arrangements for the way they extract money from their business. They rarely take a fixed regular monthly income, but will often take larger sums from time to time, or just spend what they want using the business bank account like their own personal one.
Pension contributions may be in lump sums once a year, and other costs such as company cars or other benefits can vary from year to year. Some people may have home offices and miss out on legitimate expenses that can be paid by the business.
Dividends are often paid, but not documented and supported correctly to substantiate that they are a return on investment for their shareholding and not an income for their role in the business.
Our role is to understand all of these elements and to plan the way these amounts are delivered and reported to HMRC to maximise the tax efficiency of the whole package. Not only does this mean determining the key components, but also the timing of the various transactions between different accounting periods and different tax years.
There are many complications beyond just the tax that falls due. High levels of income in any tax year can have a negative impact on pension contribution levels and tax liabilities.
Our role is to consider all of the important factors and guide clients on the optimum plan for them.