Most construction firms speak to their accountant about tax after the year has already ended.
By that point the bill is a fact rather than a decision.
Everything that could have changed it happened during the year. What you took out of the company and how. Whether the telehandler was bought in the last week of the year or the first week of the next one. Planning is the work done before the year end date, while those calls are still live. Afterwards we are filling in a return.
What gets looked at before your year end
How you take money out. Salary, dividends, pension and anything in a director’s loan account are treated differently, for the company and for you. The mix that suited you at £600,000 of turnover is rarely right at £3 million.
When plant and vehicles get bought. A capital purchase falls into one accounting period or the next depending on the invoice date, so where the spend was happening anyway, moving it either side of the year end moves the relief with it. Buying kit you did not need in order to save tax is a bad trade, and we will say so.
Capital allowances on what you already own. Plant and commercial vehicles are treated differently from cars, and the treatment follows what the asset is rather than what it cost. Firms fitting out a unit often have qualifying spend sitting in the accounts as a repair.
Pension contributions. A contribution paid by the company is a cost of the company, and the date it is paid decides which period it belongs to. It is one of the few levers left close to a year end. It is also money you cannot get back until you are old enough to draw it.
R&D, only where it is genuinely there. Construction has been hit harder than almost any sector by firms selling R&D claims that should never have been made. Groundworks are not research. A difficult site is not research. Where a real technical advance has been attempted in a method or a material, and nobody knew whether it would work, there may be something to look at. Most construction firms do not have a claim, and we will not put in one we would not want to defend.
The shape of the business. A trading company with property held personally, or plant owned by one company and hired to another. How you are structured affects what it costs to take profit out, and what happens when you sell.
The year end date itself. An accounting reference date is not fixed forever. Where a company has had a strong year, or a large job finishes shortly after the current date, moving the year end changes which period the profit lands in. It carries consequences of its own, so it gets looked at properly.
What is included
- A planning meeting held before your year end date, while the figures can still be affected
- A profit extraction plan covering salary, dividends, pension and the director’s loan position
- Review of capital spend planned for the coming year, and timing
- Capital allowances checked against what you have bought, including spend written off as repairs
- An honest view on R&D, including when there is nothing there
- Review of the business structure against what you now own
- A view on the accounting reference date where changing it would help
- Written notes of what was agreed, with dates against each action
How it works
- First call. We go through the current year figures and what you plan to buy or build.
- We work out the tax position as it stands, so you know what is coming before anything changes.
- We come back with the options, and what each does to the company and to you.
- You decide. Some of it will be things you were doing anyway, moved to a better date.
- We put the actions in writing and chase the ones due before your year end.
- After the year end we prepare the accounts and the tax return, and book next year’s meeting.
Who this is for
UK construction limited companies turning over between £500,000 and £5 million. Firms making real profit that have started to notice how much of it goes out again.
It is not for you if you are looking for a scheme. We do not sell arrangements or R&D claims that only work if nobody reads them. It is also not for you if the first tax conversation is when the bill arrives.
Common questions
When should we be having this conversation?
Before your year end, with enough time left to act. Most of the useful options need longer than a fortnight.
Will you do this if you do not do our year end accounts?
We would rather do both, because planning depends on knowing what the numbers are doing during the year.
We were told we could claim R&D on our sites. Could we?
Possibly, and probably not. It turns on whether a genuine technical problem was solved rather than a difficult job completed. We will look and answer straight.
Does buying a van before the year end save us tax?
It changes which year the relief falls into, worth having if you were buying the van anyway. Spending money you had no plan to spend is a poor way to cut a tax bill.
Can you review a claim someone else has put in?
Yes. If it was sold to you by a firm taking a percentage, it is worth a second pair of eyes.
Book a call before your year end date. Bring your last set of accounts and a rough idea of what you plan to buy over the next twelve months, and we will tell you on the call whether there is anything worth acting on.
Common questions
When is the right time to do tax planning?
Before the year end, not after. Once the year has closed most of the useful options have gone. The work that saves real money, timing capital purchases, remuneration structure, group relief and pension contributions, has to be decided while there is still time to act.
Do you handle capital allowances on plant and vehicles?
Yes. Plant, machinery and commercial vehicles carry allowances that construction companies frequently under-claim, and the treatment of vans against cars is different in a way that matters. We look at what you have bought and what you plan to buy, because the timing changes the answer.