BUSINESS TAX WHERE ARE WE NOW? Author Julie Hopkins of Buyacarehome and Ownacarehome

With 2022 now firmly behind us many thoughts will be turning to the submission deadline for self assessment tax returns (31 January 2023) and the subsequent tax year end planning strategies to 5 April 2023.  Meanwhile, businesses will be seeking counsel from their advisors reference the changes in business taxes ahead.  A busy time for accountancy and tax professionals!

Business owners often ask their advisors efficient ways to draw money out of the business subject to its structure and whether their current business structure is fit for purpose.

The onset of dividend taxation reform back in 2016 brought a different stance on some of the reasoning behind incorporating a sole trader or partnership business into a limited company, and over the years the Government has endeavoured to close perceived tax loopholes, with the result of reducing what could be perceived as tax motivated incorporation.

Corporation tax changes ahead

From April 2023, the main rate of corporation tax will increase to 25%, with company profits not exceeding £50,000 continuing to use the small profits rate of 19%.

Companies with profits in excess of £50,000 will be charged at 25%, however, where profits do not exceed the ceiling of £250,000 businesses will see the return of the marginal relief which will result in the reduction of the effective rate of tax.  All very complicated which is where the Buyacarehome and Ownacarehome tax and accountancy professionals come in!

Incorporation of a business together with evolving structures look ahead to the current and future growth journey of a business, and in the context of a care home group this can be seen from the outset, when a business is seeking finance for extensions and mergers and acquisitions. 

The future of incorporation

Whether to incorporate or not takes into account various planning scenarios and a professional advisor works alongside a business owner to consider the strategy outcomes, with tax, growth and succession planning playing their part.

When an incorporated business is in growth stage and/or it is building up a contingency fund, not all profits get extracted from the business, which leaves room for the undrawn profits to support the business needs in times of challenge as well as growth.

Capital Tax Allowances

As detailed in the Chandler&Co December 2022 newsletter, Rachel Sanders of Jex Capital Allowances highlights where we are currently with capital allowance reliefs, a relief that can get overlooked but can in fact be a ‘hidden gold mine.’ 

Of note is that the Super Deduction incentive will cease on 31 March 2023.  This relief can be subject to complexities which Jex Capital Allowances can help you navigate.

The good news is that the Annual Investment Allowance (AIA) threshold of £1 million has been made permanent.

Conclusion

As with all taxes they are at the mercy of each successive Government thus what applies today may not apply tomorrow and it goes without saying that having the support of a professional advisor along the journey of your care home business goes a long way.

For more information visit Buyacarehome and Ownacarehome finance partners.