Tax Advice

In 2017 Amazon almost halved its declared UK corporation tax bill. It went from £7.4m in 2016 to £4.5m and understandably left many SMEs frustrated, particularly those in the retail sector.

At Cottons, we can’t quite influence the fairness of the tax system but we are able to help an independent retailer keep their tax arrangements legally lean like Amazon’s so we’ve put together the following advice.

The Tax Deductions All Retailers Should Be Making

Most small retailers will employ staff who are of course there to serve a purpose, but did you know that this part of a store’s natural infrastructure can also be used to save you money on your tax bill?

The Employer’s Allowance was brought in to encourage small and first-time employers to take on staff. Under the scheme, you do not pay this tax liability for the first £3,000 of employer’s national insurance incurred, which means you could employ a staff member for £30,000 and not suffer any employer’s national insurance.  If you aren’t currently using this scheme, then seek further advice as you may also be able to make a backdated claim and a national insurance repayment.

Furthermore, if you own the commercial property in which your store operates you may also be eligible to receive business rates relief. To qualify, you must own a single property with a rateable value less than £15,000. However, even if owners use more than one property they may still be eligible for relief. If you feel this relates to you then your local council will be able to give more information on business rate bills.

Use Software to Save Time and Money

It’s true that many small retailers are managing a high volume of low-value transactions to make their desired turnover. It’s great to be busy but what comes with that is less time to do important bookkeeping.

Several missed tax-deductible expenses can quickly accumulate due to mounting piles of receipts. Being organised with general administration and appointing some time or someone to manage the recording of your sales and purchases will inevitably pay off in the form of more accurate and efficient tax returns. Previously, this process might have been laborious for retailers but nowadays with the introduction of software like Xero and Receipt Bank it’s much more manageable, some might even say enjoyable, and means that bad bookkeeping should no longer be a reason for an inefficient tax bill. Goodbye receipt hoarding, hello tax savings!

Xero, for instance, is compatible with sector-specific plug-ins designed to manage the recording of transactions in line with the nature of the operation. It is also possible to link accounting software like this to your bank account to automatically feed in purchase information, eliminating the need for excessive data entry. By taking time to implement these systems, a retail business owner will streamline their admin process, save time spent on it and ultimately achieve a more pleasing tax bill; not to mention they will be on top of their financial status in real time, all the time. Handy!

The Bottom Line

In addition to those that we have mentioned, there are a plethora of ways an independent retailer can reduce their tax bills and increase their profit margins. The all-important bottom line is that businesses can reduce the amount of taxes they pay if they take advantage of tax breaks and opportunities that are out there, but they cannot always be aware of them by themselves.

Ollie Warne, Associate at our London Branch advises, “As a business develops, it’s always advisable to take on the services of an accountant as they are best placed to identify and apply for types of tax relief which could have been missed before.”

Owning a small business and running it is a daily challenge without having to worry about tax bills. Using the help and advice of expert accountants means owners can focus their attention elsewhere without the burden of financial administration always on their minds.

A good accountant can help small business owners discover new ways to lower taxes. With rules for personal and business tax deductions often changing, the decisions a company makes now can potentially save significant amounts of money this year and for the future, so talk to us.

As well as being equipped with great tax saving tips, Cottons Accountants London can review monthly expenditures and suggest areas in which retailers can reduce spending without compromising customer service or quality.

Did you know that soon, PILONs could be a thing of the past? No, not Pylons as for now we’ll still need those for carrying our electricity. What we mean here are PILONs, aka Payments in Lieu of Notice or, the amount of money some employees are given in exchange for not working their notice period.

History of the PILON

Our very own tax expert, Matthew Harrison has written an article for Green Umbrella in which he explains, “Historically, where an employee didn’t work their contractual notice period they received a ‘Payment in Lieu of Notice’ or PILON as they became known. Over time, a whole series of case law developed around whether this should be taxable or not. The question that arose was ‘Is the PILON a contractual right or not?’ If so, then it would be subject to tax and national insurance under the normal earnings legislation.”

However, if not a contractual right then it could be classed as damages instead which would have tax, national insurance and structure of contract implications.

The Whole Story

Rather than us re-write the well written expertise of our colleague Matt, we’re going to direct you straight to his article to find out the rest.

Read all about how this could be the end of the line for tax free PILONs.

Our property tax experts have put together this definitive list of all recent changes to property taxes and given advice on how to manage them.