Mercia | Taxation, Business & Finance Advisers

By Tax Strategies, we mean the plan to reduce the amount of tax that could otherwise be payable without planning, the plan often involves reducing the amount of tax owed by an individual or business by taking advantage of various tax credits, deductions, exemptions or income deferral strategies within the boundaries of the law. So what could be a simple or more complex tax strategy?

SIMPLE TAX STRATEGIES – put simply means reducing your tax, extending this means reducing your income or increasing your deductions. There are a number of reasons why people don’t claim all the deductions they are entitled too, these include:

• The Accountant misses deductions because the accountant is rushing the tax return and therefore does not take the time to think of the deductions possible, or use a checklist to ensure all the deductions are claimed, or ask the client questions to determine if all deductions are claimed. We use checklists and your tax returns are reviewed to ensure nothing is missed.
• The Accountant is not an experienced and or qualified Accountant such as a CPA or ICA, we are a mix of CPA’s & Chartered experienced.
• Because the tax return is prepared by the taxpayer themselves and they are unaware of deductions they could be entitled too, and in the process misses out on deductions that could have saved tax far more than the accountants fees which are deductible remember.
• The client doesn’t ask the Accountant for any alternate strategies to help reduce tax, or the Accountant doesn’t offer the client to come in for a separate meeting to discuss strategies.

MORE COMPLEX STRATEGIES – Tax Strategies for example could be the choice of a legal entity to use for a transaction or business, the tax strategy could be used in conjunction with strategies such as <asset protection strategies> to arrive at an overall strategy tailored for the particular needs of a client.

The planning of tax strategies took on a whole new meaning in 1983 when Part IVA was first introduced into the Tax Act (although in 1983 in a reduced form for blatant avoidance), this anti avoidance provision now strikes down any tax benefits arising from a transaction where the “dominant purpose was to reduce tax”.