Colin Smith‘s CV Highlights //
2016-Present // CFO – D3O
2015-2019 // NED – Hurleypalmerflatt
2011-2015 // CFO – Hurleypalmerflatt
2004-2007 // MD/FD – Spaform
After months of uncertainty and indecision, the government has finally settled on its proposed increase to corporation tax. As of April 1st, the standard rate for profitable companies will increase from 19% to 25%, and could therefore have a significant impact on businesses across the UK. Although this rate only applies to businesses making a profit of £250,000 or more – with marginal relief being provided for those making less than that and a small profits rate of 19% being afforded to those making under £50,000 – we felt it necessary to give our members some advice for how they can prepare.
Financial expert, Colin Smith, currently the CFO of D3O, gave us his opinion on the current financial climate and shared his tips on how CEOs and founders can manage the looming corporation tax increase. He claimed that all the majority of business leaders want is a “stable, predictable tax environment which encourages innovation and the creation of jobs, and makes it easy to understand how much tax needs to be paid.”
Unfortunately, the government have failed to deliver in this regard recently, with their indecision surrounding changes to NI and corporation tax making the law ever more complex. With that in mind, here are Three Things – three pieces of clear, actionable advice you can implement today – Colin suggested to help business leaders prepare for the upcoming corporation tax hikes:
Focus on your business plan.
“Most business plans don’t rely on a particular tax rate being charged”, Colin explained, “and corporation tax is payable after the year end for small businesses, so your cashflow won’t be reduced for a while.” The key message here is not to panic. Although the tax increase may mean you come away with less profit than you’d originally hoped, if your plan was solid to begin with, there’s no reason it will be any less viable after April.
Be shrewd in your approach.
Colin explained that there are opportunities to make your life easier when it comes to corporation tax, you just have to look for them, and to emphasise that point, he shared three useful examples with us. “Remember that your costs can be accrued into a year’s accounts and actually paid for after that year ends”, he shared. “Also make sure you claim everything allowable – a good place to look in that regard is in R&D claims. And finally, remember that bonus payments paid after a year end can actually be accrued into the year they were earned rather than the year they were paid.”
Enlist the help of a good tax advisor.
Tax is a tricky subject at the best of times, but especially at the moment, with a government so prone to U-turns in its financial strategy. So, Colin’s final piece of advice was to “get a good tax advisor and challenge them to add value to your business.” A tax expert will be able to spot opportunities to save on tax payments a lot easier and quicker than you can, yourself. They will know where to look and will ultimately save you both time and money.
We’d like to thank Colin for helping us make sense of a particularly complicated topic for the benefit our members. If you’re concerned about the imminent corporation tax increases, or would like advice and support with another challenge you’re facing that is not mentioned in this article, apply to All Together today for up to 5 hours of pro bono mentoring with a leading CEO every year.