Top ten credit crunch tax breaks, part 2

In part one of this series Paul Webb, tax partner at Robert James Partnership, discussed tax breaks involving staff benefits, dividends and share options, read on for more credit crunch-busting tax tips.

Transfer assets to maximise personal allowances

A third option is to ensure you fully utilise any available exemptions and personal allowances. Married couples and civil partners are still able to transfer assets between themselves to reduce their tax liabilities. 

In fact, before the Pre Budget Report, income shifting, which is the practice of dividing income between family members - for instance, paying wives or husbands from company dividends - was about to come under scrutiny by HMRC, but this is now no longer the case and is therefore still a very useful tax planning tool.

Plan investments to maximise capital allowances and go for green

The other big area where business owners should take advantage is by attentive planning to maximise capital allowances opportunities.

Explicit guidelines exist around the possibility to claim enhanced capital allowances (i.e. whereby you can write off 100% of costs in year 1) for so-called green equipment investments such as energy and water conserving equipment. 

It is also possible to claim 100% allowances in year one on all capital expenditure relating to R&D equipment and in addition, businesses can get a further deduction under the new Annual Investment Allowance for up to £50,000 of expenditure per year. 

Although you may not be considering major capital expenditure in the short term, it is well worth planning carefully to maximise any tax breaks available should you need to invest in new equipment.

Rent a room and get £4K tax relief

In my view these are the main areas where SMEs and their owners can realise tax benefits but other opportunities do exist. For instance, it is possible to claim relief against any income you receive if you let a room in your house.

The amount of relief claimable is £4250 and while letting out a room in your home is not always an attractive option, it does represent a significant tax free income.  It is also well worth ensuring that you and your spouse take full advantage of the £7,200 annual ISA allowances, both as savings and other investments. 

Claim temporary rates exceptions on empty property

Returning to the issue of property it is now also possible to claim a temporary exemption for business rates if you own property with an annual rental value of £15,000 or lower. This was a change introduced in the recent PBR and will be applicable starting from April 2009 for 12 months. 

Ask the tax man for more time to pay!

Finally, if as a business owner you are struggling to the point where you become unable to pay tax bills, HMRC are committed to giving small firms as much leeway and flexibility as they need. 

If you think you may struggle to meet your obligations,, it is important to make the Revenue aware of the potential problem as soon as possible, and they have assured business owners in the PBR that firms can take as long as they need, with no penalties or surcharges to be imposed.  

www.rjp.co.uk

Click here for part 1 of this series

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By LaunchLab.co.uk  on   Dec 05,2008

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