With further tax increases on the horizon and inflation rates at a 30-year high, it’s no surprise that many park owners are feeling particularly nervous about the future.
Whilst the ‘bigger picture’ still remains unclear, there are things that can be done to improve your immediate tax position. By taking advantage of legitimate ways to save tax, you can make a significant impact on the profitability of your park.
Here are some tips to help your park business become more tax efficient.
#1: Claim all your deductible expenses
It may sound obvious, but one of the simplest ways to reduce your tax liability is to claim all eligible business expenses. In general, expenditure is tax deductible if it meets the “wholly and exclusively for business purposes” test. Here is a sample list of the most common businesses expenses claimable by park owners:
| Business equipment and general office costs – laptops, mobile phones, furniture, storage equipment. It can also include basic items like stationery, phones, internet etc. Travel – this includes fuel (business milage), taxi’s, trains, buses, parking, hotels and subsistence when travelling for business. Clothing – uniforms or anything you wear specifically for working on the park. Staff costs – salaries and subcontractor costs, staff expenses, pension costs all count. Electric cars – for companies, 100% electric cars for directors or employees are very tax efficient. | Finance costs – this can include bank charges and insurance premiums. Running your park premises – things like heating, lighting and business rates are legitimate tax-deductible expenses. Marketing – marketing costs, such as money spent on maintaining your website and advertising. Professional fees – accountants, solicitors, environmental studies etc. Professional development – membership fees, subscriptions, books, training and attendance at trade related courses |
ZEAL TIP: Keep all receipts and make a record of any expenses paid for the business by you or, by your employees for any goods or services needed to run the business.
2: Make use of HMRC tax reliefs
There are various tax reliefs available from the UK Government to encourage business growth. Your park business could be eligible to claim one or more of them.
Here are some that are relevant to park owners:
Employment allowance
Eligible employers can reduce their annual National Insurance liability by up to £5,000. You can apply each year for the allowance – it isn’t just a one-time relief. You can claim the Employment Allowance if you’re a business or charity and your employers’ Class 1 National Insurance liabilities were less than £100,000 in the previous tax year.
Capital Allowances
You can claim capital allowances on assets that you purchase for use in your park i.e. equipment, machinery, vehicles etc. You can generally deduct the full cost from your taxable profits to reduce tax payable.
There is currently an Annual Investment Allowance (AIA) limit of £1m a year. In addition, there is a super deduction available for companies until 1 April 2023. If your company is thinking of buying new equipment or machinery, purchase it before 1 April 2023 to obtain an extra 30% tax deduction!
Capital Allowances Review – has your park missed claims for capital allowances?
Many park owners have not claimed all the capital allowances available to them. The most overlooked claims are on ‘Embedded Fixtures’. Park owners can make a one-off claim for the embedded fixtures under the ground, within the fabric of buildings on the site and certain park infrastructure. If you bought, built or extended your park, you could be sitting on significant tax savings!
Research and Development Tax Credits (R&D)
If your park business spends money on R&D, whether it’s creating something new or improving an existing process, product or system, you can claim R&D tax credits. Examples would include, developing bespoke software or applications, designing energy or water saving technologies or finding ways to reducing waste.
Contaminated Land Relief (CLR)
There are enhanced tax deductions and tax credits available to companies that incur expenditure to clean up or contain contaminations in land or buildings. For every £1 spent, HMRC will allow a tax deduction of £1.50!
ZEAL TIP: Your accountant may be your most important advisor, but when it comes to specialist tax reliefs, it’s prudent to talk with a tax expert who will have the skills and knowledge to maximise any tax relief entitlement. Much like a GP and consultant relationship.
#3: Boost cash flow with the right VAT scheme for you
VAT Registration
VAT registration becomes compulsory when the taxable turnover of your park is more than £85,000 in any 12-month period. Remember, you can reclaim VAT on certain business costs incurred pre-registration.
VAT registration can be mitigated if the park has several activities. For example, if you have a club house on site, the income received from sales should be accounted for separately to pitch fee income.
Could you benefit from a different VAT Scheme?
There are several VAT schemes available to businesses. For park owners, the cash accounting scheme (pay VAT on cash received and expenses paid basis) and annual accounting scheme (1 VAT return and payment a year) could be beneficial and boost cash flow. By retaining VAT income for a longer period, you can utilise this cash in your business, before you have to pay it to HMRC.
Park businesses with a turnover of £150,000 or less can register for the Flat Rate VAT scheme. This allows you to pay a fixed percentage rate on sales (12% to 14% depending on park activities) but you can’t reclaim any VAT on purchases. Given VAT on purchases is minor in the park industry, this could be a valuable option. There is also less record keeping required, saving more money and most importantly, your time.
ZEAL TIP: Simple ideas for boosting cash flow through clever VAT management.
- Set up your invoice terms to get paid quickly, but try to ensure the sale is recorded as early as possible in the VAT return period.
- Agree terms that give you as much time as possible to pay suppliers.
- When buying expensive items for your park, try and do it before the end of the VAT quarter or VAT return period.
#4: Incorporation of your park
Many parks are operated as un-incorporated businesses, which usually means they are paying too much tax. By restructuring your business into a corporate entity this can result in lower annual tax charges. Incorporation also provides the flexibility to plan for the future by bringing family members or key employees into the business ownership. A popular option for park owners is to structure the new company with different classes of shares, enabling them to pass on ownership over time, whilst remaining in full control of the company in the short-term.
Another major benefit of incorporating a park is the ability to eliminate Capital Gains Tax (CGT) due on the rise in value of the park since purchase. When the park is transferred to a company and incorporation relief is claimed, there is no CGT payable. It is then possible for the company to sell the park in the future and only pay CGT on the rise in value since incorporation.
#5: Sell some or all of your park to your Pension Fund
It is possible for a park to be acquired by your personal pension fund. This can be extremely tax efficient. The rise in value of the park or any income received (rent payment for use of the park) is not taxable. Personal pension funds are also outside the scope of inheritance tax. This overcomes a major obstacle for many park owners that don’t meet the business test for inheritance tax relief.
A major non-tax benefit of selling your park to a pension fund allows you to access pension cash now. This is extremely valuable for under 55 year olds trying to raise cash for investment.
#6: Utilise tax losses
If you made a loss for tax purposes in the last couple of years, make sure you take advantage of the loss reliefs available. This can include setting the losses against income tax paid from other sources in the tax year you made the loss or the year before. There is also currently the ability to carry back losses against tax paid on business profits in the last 3 years.
ZEAL TIP: Consider the tax rates you are setting losses off against. It may be better to carry forward a loss to save tax at 40% next year than carry back for a refund at only 20%.
#7: Business Rates
Ensure your park is paying the correct amount of business rates. The rateable values and reliefs available change regularly.
ZEAL TIP: Engage a business rates specialist to make sure you are not overpaying.
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There are plenty of acceptable ways to reduce your tax bill and these a just a few. By understanding the taxes your business needs to pay, you can ensure that you don’t end up paying too much or too little.
The team at Zeal Tax can offer free independent advice on the best way to manage your tax position. Call us on 01633 287898 or email hello@gozeal.co.uk
This article was written by Rhodri Taylor of Zeal Tax. Zeal, a leading capital allowances specialist in the UK, as an educational piece to help Sell My Group members understand their tax relief entitlement. Rhodri can be contacted either by calling 01633 742240 or by email on park@gozeal.co.uk. Zeal Tax offers a FREE, no obligation consultation and estimate of the tax savings and refund you could achieve.
Please note that this article is intended for educational purposes only and should not be deemed to be or used as legal, employment, or health & safety advice. For guidance or advice specific to your business, consult with a qualified professional.