How to: Prepare your business for the year-end

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Not to be confused with the tax year-end which is April 5 each year, the year-end date for your business is specific to you. The largest proportion of businesses tend to opt for either a 31st December or 31st March year-end.

Invariably the business year-end is a busy time, often centred on driving extra sales and profit into the business. Unfortunately such events mean that time given to the process of pre-year-end planning, especially for tax reasons, is overlooked or put on the back burner.

Pre-year-end planning, however, can be a key part of your trading success, bringing with it the potential of better results and reduced tax liabilities.

It should ideally be started in the last quarter of the business year-end and should be an inherent part of the good management of any business. The process should aim to:

  • Assess the level and treatment of potential profits
  • Review capital expenditure and maximise the use of tax allowances
  • Consider tax efficient remuneration and pension contributions for directors/owners
  • Consider bonuses for staff and directors (actual payment may be made up to nine months after the year end)
  • Consider the basis for profit extraction including dividend payments
  • Review directors’ loan accounts and act on these as necessary
  • Consider and influence the timings of transactions
  • Review and consider catching up with revenue expenditure (e.g. maintenance, mileage claims etc)

The practice of undertaking a pre-year-end planning exercise along with your accountant also provides the chance to consider some wider issues including:

  • Whether you have the most appropriate year-end for your business
  • Changes to the structure of your business, officers of the company or to shareholdings
  • Whether changes need to be considered to your accounting and financial systems (for example is it time to move to ‘the cloud’?)
  • The personal financial planning needs of directors and owners
  • The longer term aims and aspirations of the business owners including exit strategies

In summary, we actively encourage businesses to engage in pre-year-end planning as part of good business practice. The process undoubtedly serves to ensure a smooth financial end to the year as well as to lay the foundations for the next.