Taxing question for limited and unincorporated traders

Before I commit hours to creating a suitable tax forecasting tool, has any one come across a simple tax planner that works out the current year tax liability of incorporated or unincorporated businesses and the effects of dividend payouts on the future self-assessment liability of director/shareholders?

Ideally, the report would be updated periodically as part of a monthly or quarterly review process.

Incorporated v unincorporated traders

At least limited company accounts include a reserve for the current year’s CT liability.

There is no such requirement for unincorporated businesses as the IT liability is associated with the sole trader or partners rather than the business. Unfortunately, it is the business that will likely fund the IT and NIC costs.

Consequently, traders are led to believe that they are paying tax as they go, or in some cases, in advance, when the truth of the matter is that current year’s profits are taxed in the current year but the tax may not be paid until some future date.

Surprise, surprise

This time lag usually means that clients are confused if their tax payments are high in a period when profits are falling – as they are paying tax nine months later if incorporated, and later if unincorporated. With the rapid approach of Brexit uncertainties, I am keen to provide my clients with as much information as I can regarding future tax payments so there are no nasty – and unexpected – surprises.

Bob Edwards

Bob has been working with practices across the UK offering novel ways to improve cross-sales and increase new client acquisitions. He is also interested in "step changes" in legislation that offer challenges, and therefore opportunities, for practitioners to provide new recurring and one-off support services to clients.

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