Consider the following:
Gerry, self-employed, purchased a brand new van on 15 March 2014 for £18,000. Due to downturn in the local economy his trading profits for the year to 31 March 2014 were down to an amount equalling his personal allowance - meaning no tax liability. Fortunately, he had secured a number of regular contracts for the following year that should see things pick up. However, he would be required to travel and hence the purchase of the new van.
Toward the end of June 2014 Gerry took his books to his accountant to work out his tax position for 2013-14. In July 2014 he was called in for a meeting.
Gerry was advised that if he had delayed the purchase of his new van for three weeks, until after 5 April 2014, he could have written off the entire purchase price of the new van against his profits for 2014-15 and reduced his tax bill for that year by around £3,000. As he had in fact purchased the van in the 2013-14 tax year he could only claim the writing down allowance of 18% of the purchase price in subsequent years. With no tax due for the 2013-14 year, the impact of the purchase in that year would have been negligible and Gerry has lost the benefit of the cash flow saving that would have occurred.
The moral of the story is – planning is important.
If you are considering any significant change in your business activities talk it over with us BEFORE you undertake the change to get the best possible outcome.
The old cliché is supremely relevant: there really is no point in closing the stable door after the horse had bolted.
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Contact us at ETL Cambridge on 01223 750235
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