A different perspective on tax planning

As we hit the 31 January we can sit back comfortably in the knowledge that all client tax returns have been submitted. However our minds quickly turn to the end of the tax year and helping clients identify any last minute tax planning opportunities. This year though I have been pre-occupied with a different problem that has prompted me to stress more heavily the importance of forecasting tax payments in projections, especially when trading is so volatile.

For some clients tax payments due include a balancing payment for the year end 5 April 2011. Due to the way our tax system works tax due could be for the period ended 30 June 2010 covering the period from 1 July 2009 and this is the problem. Trading has become more difficult for many business owners and cash flow particularly tight. A large tax bill now relating all the way back to 30 June 2010, or even May/ April 2010, may therefore be difficult to settle.

Of course trading might be more positive and tax bills might be growing.

Therefore when creating forecasts remember to consider the impact of tax payments. Ask your accountant to forecast your tax liabilities and the timing of payments so that you can accurately enter them into your forecasts and projections and don't get caught out.