Year end tax planning for hotels, restaurants and the leisure sector
5th March 2018 by Fiona Hotston Moore
As we approach the end of the 2017-18 tax year (which may also be the accounting year end for many small businesses) we recommend businesses take steps to ensure they have optimised their tax position. Whilst the UK government is taking a strong stance on aggressive tax planning (tax evasion) there are statutory tax reliefs which businesses and individuals should consider to ensure they are not paying more tax than is appropriate.
Unfortunately, all too often small businesses do not consider tax planning until after the year end - perhaps when their accountant has drawn up the accounts and informs them of the tax bill. This is often too late as many of the actions required to minimise your tax bill need to be undertaken before the end of the tax year or accounting year.
Firstly, consider whether you have maximised the tax relief you will get for capital expenditure. This means taking advantage of the Annual Investment Allowance (AIA) and other capital allowances. In brief, the AIA gives tax relief for the full cost in the year of purchase on capital expenditure on items (not cars) such as refurbishment, freezers, cookers, machinery. If you are planning an investment in a capital item it may be sensible planning to bring the purchase forward ahead of the accounting year end.
Secondly, consider how you pay yourself and other family members including your spouse. Modest tax savings for those trading through companies can still be obtained by adopting a lower salary and higher dividend. Pension contributions are effective for tax relief and should be reviewed for all family members (and employees) annually. To obtain tax relief the contribution must be paid.
Consider acceleration of business expenditure and charitable donations before the year end to bring forward tax relief.
When the year end accounts are drafted you should consider whether there are any specific provisions to be made against slow moving stock or debts that are likely to be irrecoverable. In addition, consider making provision for any unpaid suppliers.
Finally, one more obscure tax relief which can occasionally be available in the tourism sector is the Research and Development Tax Relief (R&D). This tax relief is available for projects undertaken by companies which seek to advance science or technology. These could be projects producing new products, or projects to improve sustainability, an innovation in an online solution or a bespoke construction process.
In conclusion, appropriate tax planning should be undertaken annually ahead of the year end and if in doubt contact your accountant for a brief review before the end of the accounting and tax year.
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