How to Reduce Corporation Tax
How to Reduce Corporation Tax
Corporate tax planning is configuring your company’s affairs in order to reduce corporation tax. Previously an old favourite was the employee benefit trust as a way how to reduce corporation tax, which has sadly become obsolete since the 9th December 2010. However our expert tax planners have already devised clever alternative, the EFRBS II. All our corporate tax planning solutions are compliant with all current legislation and give the same corporate tax planning results as the Employee Benefit Trust did. Our Corporate Tax Planning experts will show you how to reduce corporation tax for your company.
Corporate tax planning can involve creating losses through a corporate tax planning scheme that are then set against the company profits. When it comes to looking at how to reduce corporation tax, this is one popular method.
There are many solutions to the question of how to reduce corporation tax and they all depend on your situation and your needs.
How to reduce Corporation Tax: Corporate Restructuring
Perhaps our most popular method of how to reduce corporation tax is presently the method of corporate restructuring. This method of corporate tax planning is easily and quickly done and will reduce or even eliminate your corporation tax bill. Key employees like your company directors or owners will earn a PAYE income of the size of your choosing. The rest of the company profits and bonuses will be paid to you tax-free. If you so wish you can then loan back the cash to the company as a Director’s loan, so the company still has the use of the cash. If you end of tax year is approaching you need to TAKE ACTION NOW so you don’t miss out!
How to reduce corporation tax: Offshore Holding Company
Other corporate tax planning methods include the use of an offshore holding company to own the shares of your UK Company that retains dividends abroad in a tax free environment. There are then other ways of getting the cash back to the UK tax free, thanks to clever corporate tax planning.
How to reduce corporation tax: The Offshore Finance Company
The offshore finance company is another structure, which will help you reduce corporation tax. The offshore finance company loans cash to your trading company to conduct its operations. The interest that is charged to the trading company is a legitimate tax deduction.
The list of answers to the question of ‘How to reduce corporation tax?’ goes on, but if you call us we will guide you on which corporate tax planning schemes or methods will work for your particular tax situation and organise a solution for you. How much would your company be able to grow by knowing how to reduce corporation tax employing corporate tax planning?
To qualify for corporate tax planning your company needs to have gross profits of over £200,000.
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The Following is an example of What the Employer Funded Retirement Benefit Scheme II (EFRBS II), which has replaced the Employee Benefit Trust and EFRBS I, can achieve for your company
Profit extraction methods costs and benefits compared with EFRBS II
2011/12 Tax Year Comparison
| Method of profit extraction | Bonus | Dividend | HR Co |
|---|---|---|---|
| Available (pre-tax profits) | £ 300,000 | £ 300,000 | £ 300,000 |
| Less employer’s NIC @ 13.8% | 35,062 264,938 |
NIL | NIL |
| Corporation tax (£300k @ 21%) (Note that this will need calculating each time depending on level of profits, associated company numbers, marginal rates of corporation tax, etc). |
NIL | 63,000 | NIL |
| Profits Extracted | 264,938 | 237,000 | 300,000 |
| Income tax and NIC thereon | Bonus | Dividend | HR Co |
|---|---|---|---|
| BonusIncome tax: Profits extracted up to £150,000 top rate @ 40% | 60,000 | NIL | NIL |
| Income tax: Profits extracted in excess of £150,000 top rate @ 50% | 57,469 | NIL | NIL |
| Employee’s NIC: Profits extracted @ 2% | 5,299 | NIL | NIL |
| DividendIncome tax: Profits extracted up to £150,000 top rate @ 25% | NIL | 37,500 | NIL |
| Income tax: Profits extracted up to £150,000 top rate @ 25% | NIL | 37,500 | NIL |
| EFRBS Fees @ amend % here as required 12% |
NIL | NIL | 32,727 |
| Net cash available: | 142,170 | 168,084 | 267,273 |
| Tax suffered or fees charged | Bonus | Dividend | HR Co |
|---|---|---|---|
| NIC – employer’s | £ 35,062 | NIL | NIL |
| Income tax | 117,469 | 68,916 | NIL |
| NIC – employee’s | 5,299 | NIL | NIL |
| Corporation tax | NIL | 63,000 | NIL |
| EFRBS fees charged | NIL | NIL | 32,727 |
| 157,830 | 131,916 | 32,727 | |
| Effective Tax Rate | 52.6% | 44.0% | 10.9% |
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Learn from the Experts about how to reduce corporation tax with Corporation Tax Guides
In order to save money when using any consultant it pays to have some background knowledge on corporate tax planning. This is so that your money is not consumed by lengthy explanations about how to reduce corporation tax. However, most importantly, research will help you to ask the right questions about how to reduce corporation tax through corporate tax planning.
To assist you in this regard we highly recommend that you read the tax guide that best suits your corporate tax planning needs. You can review all our up to date tax guides by visiting our book shop.
Some guides that may relate to your corporate tax planning needs and can help you learn how to reduce corporation tax are as follows. For more information about each guide, Just click on the picture.
If you’d like more personal advice and information about how to reduce corporation tax or, if you’d like to speak to corporate tax planning experts, email us now info@thetaxexperts.co.uk or call us now 24/7 on 0845 052 3787.
