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  • Writer's pictureSamantha Hind

[Series] The Business Lifecycle: Your Clients Tax Efficient Expansion Strategy

Updated: Aug 21, 2023

As your clients businesses hit their growth targets, the business owners may start to consider expansion. The business may be disposing of assets and reinvesting to expand. Likewise, the structure of the business may be considered to better facilitate expansion whether in the UK or overseas. This could be exploring new markets or new products or services.

For the purpose of this blog, we will be focusing on stage four of the business lifecycle, an expanding business.  

I’m sure you will agree that undergoing tax review (or what we like to call them; tax diagnostics) is the way to go about extracting value from a business in a tax efficient way. And becoming more tax efficient, means your clients will increase their savings as a business and personally as business owners.  



Now, a business in its growth stage qualifies for an Expanding Business Tax Diagnostic.  




Need to catchup?  If you haven’t seen our previous blog posts on this series, we recommend viewing it:



This will get you up to speed and enable you to fully understand how you can optimise your clients tax efficiency through the different Tax Diagnostics needed at each stage of a business's lifecycle.  

THE WHO, THE WHY, AND THE WHEN 

Who qualifies for an Expanding Business Tax Diagnostic?

An Expanding Business Tax Diagnostic is for a business which wants to consider expanding in the UK or overseas post its growth phase.

Why may a business be entering this stage of their lifecycle?

Once a business has hit its growth targets, the business owner may now consider expanding into new markets or new locations overseas.


When is it best to conduct an Expanding Business Tax Diagnostic?

To allow the business and its owners to have sufficient time to plan ahead, we recommend that the Tax Diagnostic is done when expansion planning starts to ensure correct planning, preparation, and implementation to ensure a smooth transition.  

THE WHAT 

What does an Expanding Business Tax Diagnostic cover? 

For Diagnostax subscribers, you can complete this through using your Tax Diagnostic software. 

To ensure that you achieve the best results for your clients, we recommend that 4 of our 9 Tax Diagnostic sections are completed. The sections included within this Tax Diagnostic includes Director and Employee Incentives, Capital Investments, Capital Disposals, Trading Activities & Taxable Profits and VAT; which wouldn’t take longer than 30 minutes.  

A Tax Review is considered a tax advice service and therefore, you can charge your clients for this service. Our DTX’ers charge £2,000+ for this tax advice service.  

As you’re an accountant and business owner, I know that your time is precious. And the most efficient use of your time is to ensure that you have the right tools to help you identify, diagnose, and deliver effective tax advice to your clients.  

I know what you’re thinking.  

But what specific tax issues will be covered in an Expanding Business Tax Diagnostic? 

And,

Do you have tax advice on how to approach these issues?”  

The tax issues covered in an Expanding Business Tax Diagnostic

Issue: Director & Employee Incentives 

This will consider up to 32 ways in which a business owner can extract value from their business whilst they continue to run it.  

This can range from trivial benefits, such as a gift voucher, to purchases of a company car for a director. 

Usually, these are areas which the accountant or business directly can put in place themselves. 

Issue: Capital Investments & Disposals

This where you will review any capital investments and disposals planned by the business. 

This can range from tax reliefs available on the purchase of capital investments to the availability of tax reliefs on the sale of business assets. 

The tax advice engagements may involve: 

  • Advice on the sale of business assets and availability of tax reliefs 

  • Advice on the VAT implications of a capital disposal 

  • Capital allowances advice on the purchase of a capital investment 


Issue: Trading Activities and Profits 

This will highlight potential tax reliefs to reduce the taxable profits of a limited company. 

This can range from R&D Tax reliefs to employer pension contributions. 

The tax advice engagements may involve: 

  • Advice on the R&D Tax Relief Claim 

  • Advice on a Patent Box Claim 

  • Advice both R&D Tax Relief and Patent Box Claim – consideration of the interactions to ensure maximum benefit is received by the company 

  • Advice on the availability of loss relief and the most efficient way to utilise the losses available  

Issue: VAT 

This will review the VAT position of the company and if there are any suitable schemes which the business could benefit from. 

This can range from VAT registration or deregistration to VAT compliance. 

The tax advice engagements may involve: 

  • A VAT compliance review 

  • Advice on VAT registration or deregistration 

  • Advice on VAT groups 


THE HOW 

Host an Impact Meeting with Client

After collecting all this information, you will want to hold an impact meeting with your client. This way, you can discuss in detail the tax issues that came up following their Expanding Business Tax Diagnostic and identify next steps.  

Now, how do you prioritise which tax issues to talk about in the impact meeting? Use the below tips. 

Tips from a Chartered Tax Adviser in identifying which tax issues to focus on:


  1. Consider the goals set out in the Discovery form for the business and its owner in relation to their life plans and expanding the business.  

  2. Look into how much is their business worth, how do they plan to expanding, what timescales are they working to, where do they plan to expand, is it new markets or products/services?  

  3. Consider whether they intend to buy capital investments or make capital disposals as part of their plans.

  4. Consider if they are registered for VAT, likely to meet the VAT threshold any time soon or if they have any concerns over the way VAT is charged. 

  5. Consider if the business owner needs to assess the value they extract from the business and their package.


THAT'S A WRAP 🙌

I hope you enjoyed reading the latest blog in this series and are feeling better equipped in completing Tax Reviews, or Tax Diagnostics as we call them.  Keep your eyes peeled for our final blog on the Concluding Business Tax Diagnostic in the coming weeks.

It’s important that the main takeaway you take from this blog post series is that depending on your client's business lifecycle stage, will directly impact the Tax Diagnostic in which they qualify for and ultimately, how tax efficient they can be.  

Remember, by achieving higher tax efficiency for your clients, they will increase the savings made for their business and personally to them as business owners. And this will positively influence their cashflow, a goal for every accountant is ensuring their clients have a healthy cashflow, and a healthy cashflow = satisfied and retained clients. 


Want to carry on this series? Then check out the final blog post here:


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