Why you pay too much taxes25th January 2018
A few months ago we decided to organise a party for our clients, to celebrate our 25th anniversary. (I have possibly mentioned this once or twice recently!).
Here’s a confession.
For the first few weeks after we made the decision, we didn’t actually organise anything. We didn’t book a hall. We didn’t book a caterer. We didn’t book any entertainment.
Instead, we spent our whole time researching.
What options were available? What ideas had other companies like ours found successful? What were the costs involved?
We knew that the project management was going to be an enormous task….
…and you can’t manage what you don’t understand.
Recently, I started talking to you about the need to treat tax just like any other overhead in your business, and proactively work to reduce it.
The same principle applies there – in two different ways.
First of all, you can’t manage your tax situation if you don’t understand anything about how tax is applied to your business.
Do you, for example, know what kind of taxes your business is paying, and how they work?
Do you know what you’re paying tax on?
Do you know the tax implications of your business decisions – for example, which premises to rent, or which tax credits you may be eligible for?
And do you know what the tax consequences would have been, had you taken different decisions?
If you’re like most business owners, the answer is probably “no”. And if that’s the case, you will find it very hard to reduce your company’s tax burden, because you’ll have no idea where to start.
Now, I know what you’re probably thinking: “Why do I need to know all this? Surely it’s my accountant’s job to know all this – isn’t that what I pay them for?”
And my answer is yes…. And no.
You see, every business owner has a duty to understand their company’s financial picture. In fact, I would argue that’s your primary duty, because your company’s very survival depends on having healthy finances.
Understanding how taxes affect your company is part of that responsibility.
At the same time, you are not a financial professional, so yes, this is an area where your accountant must play a significant role.
But here we come to that principle again…
You can’t manage what you don’t understand.
And reality is that while most accountants understand taxes, they probably don’t really understand your business that well.
So while they may be able to suggest basic tax efficiencies, they won’t be able to work with you to make sure that every decision you take is tax-efficient, looking at all the implications with you and examining alternatives. They also won’t be able to suggest legal loopholes or efficiencies that depend on knowing the ins-and-outs of what you produce and how you work.
That’s what we do, though.
As your finance department, our first priority is to understand the fundamentals of your business, because that’s the only way to really help you make sensible financial decisions. We work closely with all our clients to ensure we have deep insight into what they do, the way they work, and the marketplace they operate in.
Of course, as chartered certified accountants, we also supply the other side of the equation – in-depth knowledge of the tax system.
So if you would like to make 2018 the year where you take the soundest possible business decisions, while proactively considering and managing the tax implications get in touch.