How to make the most of your tax situation

Mark says: “Make sure you choose the right business structure. Entrepreneurs may initially enjoy savings by trading as a sole trader or partnership, rather than a limited company from the outset. Different taxation rules apply to each, there are also wider commercial considerations to consider, and the risk attached to the business. However, changes to corporation tax rates in April 2023 will erode the savings that business owners have enjoyed through the company structure at lower levels of profit. It may make more sense to start out as a sole trader or partnership, rather than a limited company, and then consider incorporation of the business further down the line once more established. There is no one size fits all and the advice will depend on each business, sector and the regulatory environment.”

Mark says: “There are three common ways of raising capital to facilitate growth, we are also likely to be looking at a limited company at this stage; issuing new equity in return for cash or services, raising debt finance through banks or other investment funds, or cash investment from angel investors under the SEIS or EIS investment schemes to allow the investor to benefit from tax relief. It is important to understand the options, the cost of each option and the wider benefits and disadvantages for the business.”

Mark says: “Make sure that you maximise available tax reliefs year on year. Often we find that growing businesses are investing in research and development and/or capital expenditure and the UK tax regime provides valuable reliefs for both areas. Make sure you seek advice from someone who has a good knowledge of Research and Development Tax Relief and Capital Allowances, ensuring they can help identify any qualifying expenditure so that you are not missing out.”

Mark says: “We are increasingly providing advice to businesses which are operating across Europe and who have seen changes in their supply chain following Brexit. If your business sources products from within the EU and then re-sells them within the EU, for example, then it may cost more in duties for those products to come via a UK warehousing facility. Establishing a distribution centre in say, France, Spain, or Ireland, and not removing those goods from the EU may be beneficial. Financing of overseas establishments in the EU may also needs further thought; the two EU Directives that provide automatic relief from withholding taxes on the payments of interest, royalties and dividends are no longer applicable following Brexit. Understanding the UK network of double taxation treaties with each country is required which adds complexity. Seek advice on your supply chain and how you are serving your customers.”

Mark says: “There are a variety of ways in which a business owner may realise an exit, for example, a trade sale, a management buyout (MBO) or simply by handing on to the next generation. An MBO often involves senior management who commence participation in the ownership of the business through employee share schemes over several years. This helps to retain and incentivise management. Planning ahead and building a business to continue without your involvement will undoubtably result in a more lucrative exit than leaving it to the last minute.”