Should I spend before the end of the tax year?

Adem · Mar 13, 2013

It's getting close to the end of the tax year (April 5th) and I'm wondering whether I should invest my profits or take a hit on the tax?

I'm not a big earner online but I recently sold my main earning website for a couple of grand and now my monthly income has dried up a bit.

Should i re-invest this money as it will in turn lower my tax before the deadline and get me earning again?

I think I already know the answer and therefore does anyone have any suggestions for investment opportunities that will earn me a monthly figure again?

Cheers.

boxfish · Mar 13, 2013

I'd look for investments but wouldn't rush out and buy one just to save a few hundred? quid.

Have you seen the selfmademinds forum? It's no longer updated but has some great info from Scott on how to find great websites to buy and monetise but it's certainly not a quick process.

monaghan · Mar 13, 2013

I'd suggest speaking to your accountant who will have all the figures at hand to advise you what will work best for you and what advantages there are to be had by putting spending into a specified tax year.

Adem · Mar 14, 2013

Cheers for the suggestions. I had a few from twitter too. I've got quite a few domains sitting doing nothing so I'm probably going to see about getting fresh content for them and developing them.

Retired_member41 · Mar 15, 2013

Investing your profits will surely have no real effect on your tax liability?

Any investment will still sit as an asset wont it, and in the wrong column on your spreadsheet?

philiporchard · Mar 15, 2013

There's certainly a difference between stock and capital costs.

I don't think spending profits on more domains stops you paying tax...

Edwin · Mar 15, 2013

philiporchard said:
There's certainly a difference between stock and capital costs.

I don't think spending profits on more domains stops you paying tax...

Depends what your main business is, and how you do your accounting.

I've seen plenty of instances where big domain traders (mainly in the US) come hunting for domains at the end of their tax year to avoid a big tax burden. So I assume their accounting is done in such a way that it "makes sense".

monaghan · Mar 15, 2013

Edwin said:
Depends what your main business is, and how you do your accounting.

Hence my original suggestion of speaking to his accountant rather than relying on advise from people forums who don't have all his info and won't have to pay for any accounting errors.

addz123 · Mar 17, 2013

I'm pretty sure it makes sense to spend it on capital for the sake of saving tax (EDIT: check the following with your accountant beforehand though).

Businesses are allowed £25,000 in annual investment allowances which has increased to £250,000 starting from January 2013 for the next 2 years anyway. You can read about it here: http://www.hm-treasury.gov.uk/d/temporary_increase_in_the_annual_investment_allowance.pdf

AIA's give businesses the ability to offset capital costs in their taxable profits. The new £250k rule is meant to spur small businesses into investing in plant and machinery over the next 2 years.

In addition to that I think you have capital allowances anyway for purchasing assets such as domains and website content.

This is all just my opinion based on extensive research and reading the HMRC website.

MikeJDS · Mar 17, 2013

monaghan said:
i'd suggest speaking to your accountant who will have all the figures at hand to advise you what will work best for you and what advantages there are to be had by putting spending into a specified tax year.

+1

philiporchard · Mar 17, 2013

addz123 said:
I'm pretty sure it makes sense to spend it on capital for the sake of saving tax.

Businesses are allowed £25,000 in annual investment allowances which has increased to £250,000 starting from January 2013 for the next 2 years anyway. You can read about it here: http://www.hm-treasury.gov.uk/d/temporary_increase_in_the_annual_investment_allowance.pdf

AIA's give businesses the ability to offset capital costs in their taxable profits. The new £250k rule is meant to spur small businesses into investing in plant and machinery over the next 2 years.

In addition to that I think you have capital allowances anyway for purchasing assets such as domains and website content.

This is all just my opinion based on extensive research and reading the HMRC website.

Take advice from an accountant, don't go basing what you do on your understanding only. I had a good experience of dealing with HMRC over the last year (they were helpful and fair), but they did a very thorough investigation and I must have used a couple of trees worth of paperwork in clarifying points with them. In total, they took about 6 months to look at the issues they wanted to investigate.

addz123 · Mar 17, 2013

philiporchard said:
Take advice from an accountant, don't go basing what you do on your understanding only. I had a good experience of dealing with HMRC over the last year (they were helpful and fair), but they did a very thorough investigation and I must have used a couple of trees worth of paperwork in clarifying points with them. In total, they took about 6 months to look at the issues they wanted to investigate.

Absolutely, I'm just saying it's worth bringing up these points with your accountant before making a decision.

I've brought up many things with my accountant that he didn't have the initiative to do himself which saved me a lot of money in the past.

For example, there's various loopholes in place to avoid charging VAT on websites that you sell to a UK person where their use and enjoyment falls outside the scope of the UK and EC.

I think it's worth bringing up that most accountants will just do a basic accountants job. If you want clever and more creative ways to save money then you usually require a higher paid financial advisor.