Two Bites of the Chancellor's Cherry
Rob Ryan of AFH Wealth Management discusses the importance of understanding and utilising all legitimate tax breaks available to small businesses.

We all know that being a small business can often mean that trading can be tough, but this has never been more true than today.

Faced with a turbulent economic climate claiming countless victims and with seemingly different rules for our elected representatives – you may be asking yourselves, where are the measures to support our smaller, skilled industries?

Never has it been more important for small businesses to think creatively, taking the initiative today to optimise and secure growth for tomorrow. To successfully achieve this though, means reaching beyond simply addressing front end sales or making strategic investments. It means working smarter and ensuring you utilise every legitimate tax break afforded to the small business. Effectively, taking two bites of the Chancellor’s cherry.

Assuming you are a Limited company, under the Annual Investment Allowance (AIA),you are permitted to invest up to £50,000 on the tools of your trade i.e. plant and equipment or even premises. Any investment up to that allowance will receive full tax relief in the same year.

But why not take two bites of the cherry?

Certain types of pension schemes provide Limited companies with the means to not only lend money back to the company but also legitimately earn tax relief.

These are known as Small Self Administered Schemes (SSAS).

Similarly to AIA, by making a contribution from your company to a SSAS you can receive full corporation tax relief in the same year the contribution was made.

However, by then simply lending the money straight back to the company you can make any planned investments and still be eligible for the benefits offered by AIA, which will immediately achieve two hits of tax relief – effectively taking two bites of the cherry.

Incurring a commercial interest rate, a loan from any SSAS is typically repayable over a period of five years, with interest repayments being a charge expense against your profits.

However, the benefits offered by taking a loan from a SSAS extend far beyond the immediate tax relief that may be felt, as they also offer a security. The loan is required to take first charge on the purchase, effectively meaning that should your business fail you will have managed to protect from creditors the tools of your trade.

If you would like to discuss this in more detail or are keen to discover other systems of support available to your business please contact:

Rob Ryan
Senior Consultant
AFH Wealth Management
St. Johns House, 16 Church Street, Bromsgrove B61 8DN
Tel: 01527 577775 Fax: 01527 577624 Website: www.afhwm.co.uk

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