by Julianne Mercer |
Running a business is not easy. Not only do you have to care for many different expenses throughout the course of the year, but you will also have to pay a tax at the end of it. Now, paying taxes is not a new concept. Every paying adult is liable to pay taxes. The problem is that the rate of tax varies. Governments usually have set thresholds for appropriate tax rates. Hence, a company that generates a higher profit must pay a higher tax as compared to a company that earns a smaller profit.
That is one of the main reasons why so many businesses often hire tax strategy companies. The tax strategy is a plan created by the company in order to reduce their annual income tax by taking advantage of numerous deductions, tax credits as well as exemptions. Unless you have extensive knowledge of taxation in the United Kingdom, it is best to hire a tax strategy company to manage your yearly taxes. Here are 10 benefits to using a tax strategy company for your business:
Reduced Income Tax
This is one of the main reasons to hire a tax strategy company. Their experts know how to get the annual income tax reduced by taking several deductions and exemptions in to account. Striking a deal with the government is their job. The company will make sure that your annual income tax is lower than what it used to be in the previous years.
A Properly Planned Strategy
There are many tax strategies that your business can adopt. While you may think you know your federal income tax bracket, it is unlikely that you pay the same amount. The taxable income is different from the accounting income. The government might use a different depreciation rate, for instance. This causes discrepancies between the tax that you calculate and the tax charged by the government.
It is important to understand the difference between accounting and taxable income. Accounting income is recorded whenever a sale is made. The company may not have received the payment for it yet. This is called a receivable amount and is recorded because companies follow accrual based accounting. On the other hand, the government charges tax only on cash basis. Hence, only payments that are received are taxed. In some cases however, certain accrual payments may also be taxed.
Your tax strategy company will devise an appropriate strategy by taking defer taxes in to account, as well as other factors, such as investing in lower turnover funds or taking benefit of capital loss deductions and charitable gifts.
They Calculate Your Taxable Income
Calculating business taxes is very different from calculating individual taxes. For business taxes, you will have to take deferred tax in to account and make sure that the annual income tax reconciles with the current tax expense. Unless you are an expert in accounting, this reconciliation might be difficult. A tax strategy company can make it easier for you to reconcile your tax documents at the end of every year and maintain a running log.
Suggestions on the Best Strategy
It is not necessary to use the same tax strategy at every stage of your business. There are several tax strategies that a business can adopt. For instance, if your business holds several investments, your tax strategy company can help you choose a viable strategy.
Here’s an example: Short term gains are taxed at a higher rate as compared to long term gains. Also, capital losses can be offset against capital gains. Now, if you want to hold your investments for the long term, the tax strategy you use will be different. At the time of transaction, you can always ask for a suggestion from your tax strategy company. Common tax strategies include First In, First Out, Last in, First Out, Highest In, First Out, etc.
Save Money on Taxation Expenditure
You don’t need to hire a special tax consultant to manage your tax files. Tax strategy companies offer several different services at a very affordable annual fee. Many start-up businesses now prefer to use these companies as they are very convenient and informative.
Prevent Unnecessary Tax Audits
By creating a well- defined tax strategy, you will not have to worry about paying excessive amounts of money in tax. That way, the chances of unannounced tax audits are significantly reduced. Given the fact that the authorities will receive complete files with well- defined explanations regarding all taxable expenses and income, you can carry out your business with complete peace of mind.
Advice on New Investments and Opportunities
In the business world, good advice is difficult to come by. For instance, it might not be in your best interests to make a new investment. Your tax strategy company can give you appropriate advice on what to do. If you are planning to hold investments, sell them or make some new ones, all you have to do is contact your tax strategy company and ask them about the best course of action.
Let You Work and Grow Your Business
Rather than being burdened by tax calculations and pointless worries, you can continue to focus on expanding your business while the company tends to your taxes. A good tax strategy company such as http://www.co-handelszentrum.com/ provides many benefits to business owners.
Prepare You For Meeting the Authorities
In some cases, the government authorities may request clarification on certain items in the company’s financials. The tax strategy company can help you understand your business’ financials better and present them in front of the authorities with more conviction and clarity.
Help Your Business in its Early Stages
The first couple of years are the most crucial for any business. At this stage, all that a business aims to do is survive. By reducing the annual tax, a tax strategy company can help you maximize net profits and secure your company’s position within the first few years.