What to do before your company Year-End

As the end of the fiscal year approaches, creative businesses must ensure they’re prepared to wrap up their financial affairs efficiently and effectively. It’s important to understand what to do before your company year-end. These tasks not only help maintain financial clarity but also play a crucial role in minimising tax liabilities. In this blog post, we’ll provide a comprehensive checklist of essential year-end financial tasks tailored to creative businesses. 

 

1. Reconcile Accounts

Before closing out the year, it’s essential to reconcile all your accounts. Review bank statements, credit card transactions, and any other financial records to ensure they align with your accounting records. Identifying and rectifying discrepancies now will help prevent issues during tax preparation and financial reporting.

 

2. Prepare Financial Statements

Compile comprehensive financial statements, including the income statement, balance sheet, and cash flow statement. These documents provide a snapshot of your business’s financial health and are crucial for evaluating performance, making informed decisions, and meeting regulatory requirements.

 

3. Plan for Tax Filings

Start planning for tax filings well in advance of the deadline to avoid last-minute stress. Gather all relevant documents, including income records, expense receipts, and any applicable tax forms. Consider consulting with a tax professional to ensure compliance with tax laws and identify potential tax-saving opportunities.

 

4. Reduce Corporation Tax Liabilities

To help reduce corporation tax liabilities just before the year-end, consider the following strategies:

1. Capital Allowances: Review your capital assets and identify any eligible items for capital allowances. Taking advantage of available allowances can help lower your taxable profits.
2. Prepaid Expenses: Consider prepaying certain expenses, such as rent or insurance premiums, before the year-end. This allows you to deduct these expenses in the current tax year, reducing your taxable income.
3. Pension Contributions: Making pension contributions for yourself or your employees can be tax-efficient. Contributions are typically deductible for corporation tax purposes, reducing your taxable profits.
4. Research and Development (R&D) Tax Credits: If your business engages in qualifying R&D activities, explore the possibility of claiming R&D tax credits. These credits can provide significant tax relief and incentivize innovation within your business.
5. Loss Relief: If your business has incurred losses during the year, explore options for utilising loss relief provisions. Losses may be carried forward to offset future profits or carried back to offset previous years’ profits, potentially resulting in tax refunds.

 

Example: Maximising Year-End Tax Efficiency for a Marketing Agency

As the year-end approaches, XYZ Marketing Agency is proactive in exploring strategies to optimise their tax position and minimise their corporation tax liabilities. Here’s how they might strategize in the last quarter of the fiscal year:

1. Expenses: XYZ Marketing Agency reviews their upcoming expenses and identifies opportunities to accelerate deductible expenditures. For example, they may choose to prepay annual software subscriptions, purchase necessary equipment or office supplies, or invest in professional development courses for their team members. By bringing forward these expenses, they can reduce their taxable profits for the current tax year.

 

1. Review Capital Assets: The agency conducts a thorough review of their capital assets, such as computers, printers, and office furniture. They identify any assets that are eligible for capital allowances and consider making additional purchases before the year-end to take advantage of available allowances. Additionally, they explore the possibility of claiming the Annual Investment Allowance (AIA) for qualifying capital expenditures, allowing them to deduct the full cost of eligible assets from their taxable profits.

 

1. Maximise Pension Contributions: XYZ Marketing Agency considers making pension contributions for their employees, including directors and shareholders. Pension contributions are typically tax-deductible for corporation tax purposes, reducing the agency’s taxable profits. By maximising pension contributions before the year-end, they not only benefit from tax savings but also contribute to their employees’ long-term financial security.

 

1. Evaluate Research and Development (R&D) Activities: As a marketing agency, XYZ recognizes the importance of innovation in their industry. They review their recent projects to identify any qualifying R&D activities that may be eligible for R&D tax credits. These credits provide valuable tax relief and can help offset the costs associated with innovative projects, such as developing new marketing strategies or implementing cutting-edge technologies.

 

1. Utilise Loss Relief: In the event that XYZ Marketing Agency has incurred losses during the year, they explore options for utilising loss relief provisions to offset their taxable profits. They consider carrying forward any unused losses to future years, where they can be used to reduce tax liabilities when the agency returns to profitability. Alternatively, they assess the feasibility of carrying back losses to previous years to claim tax refunds, providing an immediate cash flow benefit.

 

Conclusion

By applying these year-end financial tasks, creative businesses can ensure a smooth transition into the new fiscal year while optimising their tax position. As you prepare to close out the year, let AO Accountants be your trusted partner in achieving financial success. Contact us today to learn more about our specialised services tailored to the needs of creative businesses.