The timing on when to contact an Accountant or Tax Adviser is often overlooked. However it can be a vitally important issue in order to keep as many tax savings options available as possible.
When should you contact an Accountant?
For an Accountant or Tax Adviser to best advise you, you should always contact them prior to making a decision that has implications for your business. When you make a transaction or business decision it can often have unexpected tax implications. Once an agreement has been signed, it may remove the other options, which may have been more beneficial to mitigate your tax liabilities.
A good Accountant or Tax Adviser is often a proactive one rather than reactive. This can also be said for clients. If your Accountant is having to be reactive to a decision or transaction you have made, it can have additional tax and/or cost implications.
Obtaining advice before a transaction takes place could well prevent a client having to pay tax that otherwise would have become due without guidance.
Examples of when you should contact an Accountant
This is a non-exhaustive list of examples:
- When making large or multiple large investment decisions such as the purchasing of capital assets. The timing of these purchases can be critical in order to obtain full tax relief in the year of purchase.
- If you are thinking of setting up a business, as there are different legal structures and tax implications that need to be considered.
- When you are considering buying or disposing of a rental property.
- Inheritance Tax planning: this is not just for older people, as there are allowances that younger people can also take advantage of.
- If you have a property which you have let out and also lived in as your Principal Private Residence. It is important to plan your disposal, which could be years in advance of the actual disposal date.
- When you make investments in assets like shares or cryptocurrencies and need to learn more about the tax implications.
- Accountants typically have vast networks of trusted professionals who can assist you with your other business needs.
- As an employee, should you get a company car or cash allowance? If it is your company should you buy a car within the company?
Two real-life examples of when to contact an Accountant
Accountant contacted too late
Directors of a company came in for a meeting about their business plans. We were informed that one of the Directors had signed the company up to a lease of an expensive car worth about £88k. The lease agreement was in the company name and the cooling off period had expired.
This meant that the company was providing a taxable benefit and would need to complete a P11D for the Director. The car in question created a P11D value over £32,500. The resultant tax charge for the company was £4,485 and for one of the Directors was about £13,000. These tax charges were in addition to the large monthly rental payments.
The Director said he would require a great deal more remuneration in order to meet the tax charges. This put a significant strain on the already-low cash reserves of the business.
Accountant contacted before the transaction
A Director was considering buying a new electric car, which had a new car value in the region of £90k on the road (OTR). He asked us whether to purchase it within the company or not. Electric cars attract a 100% First Year Allowance deduction if new and unused. However, the company car percentage applied to the OTR value was due to rise to 16% before falling down to 2% for the 2020-21 tax year. With company cars being taxed on their new car on the road value, the Director decided it was better to wait 2 more years before buying his electric car.
If you wish to speak to a member of our team, please contact us.