2015 – Year end Tax Tips

For most businesses, the end of the financial year is fast approaching. Here are a few areas you may wish to look at now:

 

1. Inventory

If you carry inventory, you’ll be well accustomed to the annual stock take. Some effort at this time of year to dispose of obsolete stock or write it down to its realisable value will pay dividends at tax time. A general adjustment for obsolescence will not cut it – the written down stock must be separately identifiable. Remember, showing a stock value in excess of lower of cost or net realisable value of that stock equals paying too much tax.

2. Repairs and Maintenance

It may be worthwhile to bring forward repairs and maintenance. For example, if machinery or vehicles are due for a service, consider fitting this in before 31 March rather than leaving it until April – thus bringing the tax deduction forward by a year.

3. Retentions

If you’re a construction contractor, you need to be mindful of this at year end: Retentions on building contracts are generally taxable in the year the contractor becomes legally entitled to receive them.   If this entitlement falls in April rather than March, the associated tax bill is deferred by 12 months.

4. Employee Expenses

Bonuses and holiday pay are tax deductible in the year ended 31 March 2015 if they are physically paid by 2 June 2015. If you are considering paying bonuses in relation to this tax year, make sure these are paid before 2 June.

5. Business expenses paid privately

Business expenses paid privately often fall through the gaps – and the opportunity to claim a tax deduction is lost. Now is a good time to gather up tax invoices for expenses paid privately – and to reimburse yourself from the business bank account so there is a clear paper trail.

6. Bad debts

Where your business writes off a debt that has no reasonable expectation of being paid after taking all reasonable steps to recover it, this is tax deductible. The catch is that you must have physically written the debt off before the end of the financial year. Now is the time to write off any bad debts.

7. Fixed Assets

Now is a good time to review your asset schedule. Often obsolete assets have little or no value – and any loss on their sale below book value is typically tax deductible.   If you have business assets that are no longer used, get what you can for them now – or scrap them.   Think of that unused machine in the corner – or that old computer equipment under the desk.

8. Prepayment of expenses

Most expenses can’t be fully claimed as a tax deduction if you choose to prepay them. But there are some exceptions like stationery, postage, courier charges, vehicle registration, road user charges, rates, journal subscriptions or accounting fees. There may be some possibilities to pay these expenses in March thus capturing them in this financial year.