accounts that reduce your corporation tax bill massively
Discussion
On hols at the minute and just been talking to this guy that has a Ltd company and has an accountant that does his books as normal. This accountant then passes it on to another firm that managed to bring it down from £18k to £21. He was saying they're expensive but they do it for loads of companies. Surely this is tax evasion? Unless just know loop holes that are perfectly legal. Anybody else aware of these accountants/firms?
Edited by forest172 on Friday 30th May 14:37
Zoon said:
They can't be that expensive if he's paying them out of £3k and still benefiting.
Sorry misread that, thought you meant from 21k to 18k. The only thing I can possibly think of is offsetting first year allowances on qualifying goods, but then saying that the first accountant would be able to do that anyway.
Sounds very dodgy and potential prison material.
forest172 said:
Yes sorry £18,000 to £21. Exactly why wouldn't the first accountant be able to do it. He said they just know their stuff. Costs him about £3k a year and he's insured against an inspection.
Said he will email me their company details. Interesting!!
He's insured for the costs of dealing with an inspection, not for the costs of fines imposed by HMRC for tax avoidance. Sounds like he doesn't really know what he's talking about in my opinion. He will know once it's far too late.Said he will email me their company details. Interesting!!
forest172 said:
On hols at the minute and just been talking to this guy that has a Ltd company and has an accountant that does his books as normal. This accountant then passes it on to another firm that managed to bring it down from £18k to £21. He was saying they're expensive but they do it for loads of companies. Surely this is tax evasion? Unless just know loop holes that are perfectly legal. Anybody else aware of these accountants/firms?
Is "it" the profit or tax bill?Whatever, it doesn't mater, what on earth would make you think it's tax evasion when you know absolutely nothing about how it's achieved?
The whole country has gone tax evasion mad. Legal avoidance is confused with evasion by the hard of thinking and those who pay tax PAYE.
Yes, it's perfectly possible to quite legitimately reduce a small £18k tax bill to a smaller one by engaging a specialist in the appropriate field.
forest172 said:
Yes sorry £18,000 to £21. Exactly why wouldn't the first accountant be able to do it. He said they just know their stuff. Costs him about £3k a year and he's insured against an inspection.
Said he will email me their company details. Interesting!!
I think I know what they are doing. And I agree it seems very good and all above board as it's Corporate not personal tax. I would still be wary myself purely because the recent Government actions show that the long held principle that tax legislation should not be retrospective is now well and truly dead. Said he will email me their company details. Interesting!!
Sounds like you need a proper accountant.
If the first accountant calculated a Corporation Tax liability of £18,000 and the second, using the same basic information, calculated a Corporation Tax liability of £21, that is such a wide discrepancy that it can only mean one of two things -
i) your accountant is incompetent
ii) the other accountants are possibly behaving in an extremely risky manner
You need to find out EXACTLY what this other firm has done to the figures to arrive at such a low tax liability.
Also, you should also find out how "risky" the strategy they are adopting to bring the liability down is?
I would not suggest off hand that the second accountants have done anything illegal (tax evasion) but they might be sailing close to the wind when it comes to applying some tax reliefs (tax avoidance).
Also, do you know who these other accountants are?
Have you got a Letter of Engagement in place with this second firm of accountants?
Have they ever spoken to you about your business?
If the first accountant calculated a Corporation Tax liability of £18,000 and the second, using the same basic information, calculated a Corporation Tax liability of £21, that is such a wide discrepancy that it can only mean one of two things -
i) your accountant is incompetent
ii) the other accountants are possibly behaving in an extremely risky manner
You need to find out EXACTLY what this other firm has done to the figures to arrive at such a low tax liability.
Also, you should also find out how "risky" the strategy they are adopting to bring the liability down is?
I would not suggest off hand that the second accountants have done anything illegal (tax evasion) but they might be sailing close to the wind when it comes to applying some tax reliefs (tax avoidance).
Also, do you know who these other accountants are?
Have you got a Letter of Engagement in place with this second firm of accountants?
Have they ever spoken to you about your business?
Eleven said:
Is "it" the profit or tax bill?
Whatever, it doesn't mater, what on earth would make you think it's tax evasion when you know absolutely nothing about how it's achieved?
The whole country has gone tax evasion mad. Legal avoidance is confused with evasion by the hard of thinking and those who pay tax PAYE.
Yes, it's perfectly possible to quite legitimately reduce a small £18k tax bill to a smaller one by engaging a specialist in the appropriate field.
Can you give examples of how this is achieved legally?Whatever, it doesn't mater, what on earth would make you think it's tax evasion when you know absolutely nothing about how it's achieved?
The whole country has gone tax evasion mad. Legal avoidance is confused with evasion by the hard of thinking and those who pay tax PAYE.
Yes, it's perfectly possible to quite legitimately reduce a small £18k tax bill to a smaller one by engaging a specialist in the appropriate field.
I'd be very interested in how it's possible without bending the rules.
Zoon said:
Eleven said:
Is "it" the profit or tax bill?
Whatever, it doesn't mater, what on earth would make you think it's tax evasion when you know absolutely nothing about how it's achieved?
The whole country has gone tax evasion mad. Legal avoidance is confused with evasion by the hard of thinking and those who pay tax PAYE.
Yes, it's perfectly possible to quite legitimately reduce a small £18k tax bill to a smaller one by engaging a specialist in the appropriate field.
Can you give examples of how this is achieved legally?Whatever, it doesn't mater, what on earth would make you think it's tax evasion when you know absolutely nothing about how it's achieved?
The whole country has gone tax evasion mad. Legal avoidance is confused with evasion by the hard of thinking and those who pay tax PAYE.
Yes, it's perfectly possible to quite legitimately reduce a small £18k tax bill to a smaller one by engaging a specialist in the appropriate field.
I'd be very interested in how it's possible without bending the rules.
Zoon said:
Can you give examples of how this is achieved legally?
I'd be very interested in how it's possible without bending the rules.
Very easily. It all depends on what the first accountant did or didn't do.I'd be very interested in how it's possible without bending the rules.
A very simple example.
A company makes a profit of £100,000 after all normal tax allowances and claims have been deducted. The Corporation Tax arising on a profit of £100,000 is £20,000.
During the year, the company had bought some plant and machinery which cost it £50,000. The accountant, being a numpty, only claimed the standard annual Capital Allowance of 18% which means that the taxable profit of £100,000 was arrived at after deducting £9,000 Capital Allowances (£50,000 x 18%)
Another accountant reviews the computations and sees that the business can actually claim £50,000 worth of capital allowances, under the Annual Investment Allowance rules. Therefore, he increases the Capital Allowance claim from £9,000 to £50,000 i.e. by £41,000. At 20% Corporation Tax, this reduces the company tax bill by another £8,200 (£41,000 x 20%).
This reduces the overall Corporation tax bill from £20,000 down to £11,800.
That is why I asked the question previously, what additional reliefs and allowances has the second accountant introduced to reduce the Corporation Tax bill so dramatically. They may be 100% legitimate claims - but it throws into question the possible ineptitude of the original accountant.
Eric Mc said:
Zoon said:
Can you give examples of how this is achieved legally?
I'd be very interested in how it's possible without bending the rules.
Very easily. It all depends on what the first accountant did or didn't do.I'd be very interested in how it's possible without bending the rules.
A very simple example.
A company makes a profit of £100,000 after all normal tax allowances and claims have been deducted. The Corporation Tax arising on a profit of £100,000 is £20,000.
During the year, the company had bought some plant and machinery which cost it £50,000. The accountant, being a numpty, only claimed the standard annual Capital Allowance of 18% which means that the taxable profit of £100,000 was arrived at after deducting £9,000 Capital Allowances (£50,000 x 18%)
Another accountant reviews the computations and sees that the business can actually claim £50,000 worth of capital allowances, under the Annual Investment Allowance rules. Therefore, he increases the Capital Allowance claim from £9,000 to £50,000 i.e. by £41,000. At 20% Corporation Tax, this reduces the company tax bill by another £8,200 (£41,000 x 20%).
This reduces the overall Corporation tax bill from £20,000 down to £11,800.
That is why I asked the question previously, what additional reliefs and allowances has the second accountant introduced to reduce the Corporation Tax bill so dramatically. They may be 100% legitimate claims - but it throws into question the possible ineptitude of the original accountant.
Eric Mc said:
Very easily. It all depends on what the first accountant did or didn't do.
A very simple example.
A company makes a profit of £100,000 after all normal tax allowances and claims have been deducted. The Corporation Tax arising on a profit of £100,000 is £20,000.
During the year, the company had bought some plant and machinery which cost it £50,000. The accountant, being a numpty, only claimed the standard annual Capital Allowance of 18% which means that the taxable profit of £100,000 was arrived at after deducting £9,000 Capital Allowances (£50,000 x 18%)
Another accountant reviews the computations and sees that the business can actually claim £50,000 worth of capital allowances, under the Annual Investment Allowance rules. Therefore, he increases the Capital Allowance claim from £9,000 to £50,000 i.e. by £41,000. At 20% Corporation Tax, this reduces the company tax bill by another £8,200 (£41,000 x 20%).
This reduces the overall Corporation tax bill from £20,000 down to £11,800.
That is why I asked the question previously, what additional reliefs and allowances has the second accountant introduced to reduce the Corporation Tax bill so dramatically. They may be 100% legitimate claims - but it throws into question the possible ineptitude of the original accountant.
EricA very simple example.
A company makes a profit of £100,000 after all normal tax allowances and claims have been deducted. The Corporation Tax arising on a profit of £100,000 is £20,000.
During the year, the company had bought some plant and machinery which cost it £50,000. The accountant, being a numpty, only claimed the standard annual Capital Allowance of 18% which means that the taxable profit of £100,000 was arrived at after deducting £9,000 Capital Allowances (£50,000 x 18%)
Another accountant reviews the computations and sees that the business can actually claim £50,000 worth of capital allowances, under the Annual Investment Allowance rules. Therefore, he increases the Capital Allowance claim from £9,000 to £50,000 i.e. by £41,000. At 20% Corporation Tax, this reduces the company tax bill by another £8,200 (£41,000 x 20%).
This reduces the overall Corporation tax bill from £20,000 down to £11,800.
That is why I asked the question previously, what additional reliefs and allowances has the second accountant introduced to reduce the Corporation Tax bill so dramatically. They may be 100% legitimate claims - but it throws into question the possible ineptitude of the original accountant.
I suspect its a little more "complicated" than this - IO await with baited breath!
David
Mr Overheads said:
Another example might be that the "2nd accountant" is an R&D Tax relief expert. It's a highly specialised field and even the big 4 firms R&D 'experts' can be beaten by miles by a R&D only firm. Completely legitimate and is a scheme to encourage innovation in the UK. i.e. if you lose thousands experimenting/researching/failed prototypes etc etc then you get relief agaisnt your profits for it.
You don't have to "lose" anything. All you need to do is have legitimate R & D costs.Its nothing to do with me a guy here on holiday.
OK so tax evasion is probably the wrong word. But for one accountant to say corporation tax is £18,000 and then this so called special firm manages to reduce it too £21 I can only smell a rat. Although if this is the case I'll be showing my books to see if they can reduce my large corporation tax bill
OK so tax evasion is probably the wrong word. But for one accountant to say corporation tax is £18,000 and then this so called special firm manages to reduce it too £21 I can only smell a rat. Although if this is the case I'll be showing my books to see if they can reduce my large corporation tax bill
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