My thanks to Roy Finucane from TaxAssist Accountants in Limerick City for providing me with this week’s guest blog.
Roy Finucane’s TaxAssist Franchise was the 2013 TaxAssist Franchise of the Year. Roy is an accountant with over 19 years’ experience and the ideal outsource partner for the small business owner in Limerick.
Here Roy outlines 20 ways you can increase your profit in 2017
- MAKE USE OF LOSSES!
You may be able to carry forward any losses from previous years against future profits, or set them against other income for immediate tax relief. Make sure your accountant reviews and advises on the most tax efficient treatment for your business.
- CLAIM THE CORRECT MOTOR & SUBSISTENCE
When it comes to motor expenses, lots of people simply claim the specific amount of mileage they have used. However, it is often useful to note that Revenue will accept payment of mileage and subsistence rates based upon civil servant rates. These rates can be quite beneficial to Directors and employees. Remember though that proper records and control systems must be in pace to substantiate claims.
- DON’T PAY VAT TOO EARLY
Ensure your Accountant has registered your business to return VAT on the “cash receipts basis”. This means you only pay VAT to Revenue when you have received payment from your customers. The crucial benefit here is that you can also reclaim VAT on purchase invoices paid and unpaid for the relevant VAT period, easing your cashflow somewhat.
- CHECK YOUR STAFF’S TAX CREDITS
As well as checking your own tax credits you should also ensuring your staff members’ tax credits are correct. You do not want the surprise of having to pay a large refund of tax to a staff member in Month 4 and then wait a number of months to receive the refund from Revenue.
Operating a company pension scheme can have significant tax savings for your business. Employers can save10.75% employer PRSI on payments made into a company pension scheme on behalf of staff members.
- DON’T MISS OUT ON CAPITAL ALLOWANCES
Depreciation of assets is not tax deductible; however capital allowances is a form of tax deprecation that can reduce your taxable profits. Ensure you keep accurate records of all assets bought and sold to guarantee your accountant can calculate accurate capital allowances.
- TRAVEL PASSES/BIKE TO WORK SCHEMES
It can be beneficial for both you and the employee to implement these schemes, saving you 10.75% Er PRSI on the cost of the travel pass or cost of the bicycle.
- DON’T FORGET TO RECLAIM VAT ON DIESEL
If you reimburse employees who use their own vehicles for legitimate business travel to clients’ premises, you are entitled to re-claim the VAT on diesel relating to this expense. VAT on unleaded petrol cannot be reclaimed.
- OTHER ASSETS
Normally you receive a tax deduction over 8 years when purchasing certain assets, however an accelerated tax deduction (100% in the year of purchase) is available for certain energy-efficient machinery/technology purchases, for example computer-based systems, designed primarily to monitor and control building energy use or Efficient Heat Conservation and Recovery Equipment. This “green allowance scheme” relates to assets purchased before 31 December 2014. Be sure you talk to your accountant to attain a more definitive list of assets and ensure you are claiming all that you can
- CLAIM CORPORATION TAX RELIEF
If you set up your company in the past number of years and you employ a number of staff, you might be entitled to claim the corporation tax relief, based on the amount of ER PRSI your company pays. If you haven’t generated a profit the relief can be carried forward indefinitely.
- MOVE FROM A SOLE TRADER TO A LIMITED COMPANY
It may be time for you to consider moving to a limited company structure to save tax. It is important to consider the commercial and tax issues before deciding to do so. A key area to examine is if the company has significant spare cash available each year and if you are starting to pay tax at the top rate of 41%. If so, it may be advantageous to incorporate.
- PAY INTO A PENSION SCHEME
Setting up a company pension scheme for directors can save tax as the company can contribute generous amounts over and above the directors’ own personal tax relievable limits. A portion of the pension can be drawn tax free upon retirement.
- CONSIDER EMPLOYING YOUR SPOUSE/CIVIL PARTNER
Employing a spouse in your company may allow you to claim the maximum standard rate tax band and pay more tax at 20% rather than 41%.
- CLAIMING RETIREMENT RELIEF
When deciding to retire or exit a company, selling your shares may be exempt from tax as a result of CGT retirement relief. If you are planning on selling your shares and are aged 55 or over, relief of €500,000 up to €3,000,000 may be available, depending on a couple of factors, such as your age or who you are selling the business to.
- TAKE ADVANTAGE OF THE HOME RENOVATION INCENTIVE
The home renovation incentive is now available to landlords for investment properties. Essentially, it allows for an income tax credit at 13.5% of qualifying expenditure on repair, renovation or improvement works carried out on a main home or rental property by qualifying contractors.
You can earn up to €12,000 tax free by renting a room to an unconnected person, in your principal residence.
- MAKE SURE YOU CLAIM FOR MORTGAGE PROTECTION POLICIES
One area that is commonly omitted when preparing rental accounts is the inclusion of mortgage protection policies. Payment of mortgage protection policies aimed at covering the full amount left outstanding on a person’s mortgage should they die, should be deducted when calculating rental profits.
- SMALL GIFT EXEMPTION
You can gift up to €3,000 per year to each child without attracting gift tax. Therefore, a parent can plan in advance by gifting €3,000, to each child, for a number of years tax free before transferring other assets to reduce the overall value of assets/estates gifted/inherited.
- TRANSFERS BETWEEN SPOUSES
There is no Gift/Inheritance tax on transfers of assets between spouses.
- BE SURE NOT TO PAY CGT AND CAT ON THE SAME TRANSACTION/EVENT
Where for example an investment property is transferred from father to son (CGT is payable by the father on transfer, CAT is payable by the son on the gift), the CAT payable by the son can be reduced by the amount of CGT payable by the father. The son’s CAT bill can also be reduced by the stamp duty paid on the gift of an asset.