It’s pretty much guaranteed that 95% of you reading this are MSP business owners who want accounts and tax support from your accountant. You don’t want to pay too much tax and you’d like to mitigate tax where possible.
Some MSP business owners don’t know this, but as they progress through the different stages of the business’ life cycle, there are different tax advice options to consider, to make sure a business is paying the most efficient amount of tax.
Blissfully unaware of their tax advice needs, business owners are focused on working in their business and building the value of their business… sometimes forgetting to build, plan, structure, and protect their wealth – outside of the
business.
Equally, it’s something that’s often not picked up as there is a blurring of the lines between corporate and personal tax planning, as well as wealth planning. This makes it more difficult to manage.
In this case study, we’ll show you how one client of MSP Finance Team turned things around, with a Tax Diagnostic Review; Profit Protector
THE CLIENT
There are five key stages a business will go through in its life cycle from launch to exit. At each stage there are different tax advice options to consider, to make sure you are paying the most efficient amount of tax. In this case, the business is a growing MSP which has experienced continuous steady growth, year upon year. Lead by 2 directors, who have 50/50 ownership, the business has achieved a £1,000,000 turnover. In the last year this equates to 20% growth. The business is supported by 5 full time staff, and delivers IT Services & projects. Aware that they were growing, the directors knew they needed advice to improve how they take out money and reduce higher rate tax brackets. They were recommended a Tax Diagnostic Review to make sure all boxes were ticked , no stone was left un-turned, and all areas had been considered.
At the center of the review were 3 main objectives:
1. Identify all tax saving opportunities
2. Extract as much value from the business to benefit the directors, their families, and employees.
3. Impact life at home, especially for their children.
THE TAX DIAGNOSTIC REVIEW
A Tax Diagnostic Review is like an MRI scan or MOT for you and your MSP business that will reveal all of the possible tax advisory opportunities available for your needs, circumstances, and goals. As the business grows, the director shareholders often look to maximise their takings, invest in the business, and want to mitigate chargeable profits to Corporation Tax. The growing business Tax Diagnostic Review explores all the options available. From director and employee incentives to capital investments, trading activities, taxable profits and VAT.
THE PROCESS
The client was taken through 4 simple stages.
STEP 1: Discovery Stage
We gathered the key information required about them and their business, in order to complete Step 2, the Tax Diagnostic Review.
STEP 2: Tax Diagnostic Review
We ran a Tax Diagnostic Review on them, and analysed the findings, to put together an action plan. The review revealed 34 possible opportunities. It’s all about picking the best one’s for the client’s goals.
STEP 3: Impact Meeting
We invited them to a 45-min ‘Impact meeting’ where we took them through the Tax Diagnostic results. We explored 11 priority areas, explaining why it is relevant, the benefits and the tax savings. The client took away an action plan outlining the priority areas to focus on, including estimated tax savings and quotes for the delivery of recommended tax advice.
STEP 4: Take Forward the Advice!
We then took forward the immediate tax advice, and worked with them to deliver the rest of action plan.
THE BENEFITS
For the MSP Business owners
- The owners gained comfort, confidence, and certainty, knowing that all bases are covered
- Relief from his concerns that something might be missing
- £20,000 in savings, already implemented, and more still to look at!
- An Immediate £3,000 saving
For the MSP Business
- Corporation Tax savings
For the family
- One of the children has been employed, giving them pocket money today and getting involved in the family business
- This extra support has alleviated some admin work, saved on tax, and brought more value into their household for only a £600 pcm payslip!
This child will now be starting her savings early which will accumulate into great foundational wealth in no time!
THE RESULTS
Savings: £20,520
Number of Tax Advisory Opportunities revealed: 34
Number of Actions agreed: 11
- Actions for Client
- Employing spouse & child
- Combining holiday & business travel
- Charitable donations
- Relevant life insurance
- Client entertaining costs
- Spotify & Amazon subscriptions
- Tracking his spending / withdrawing of company funds
- Annual event allowances – Christmas
- Pensions
YOUR NEXT STEP?
Find out more about the MSP Finance Team Tax Diagnostic Review; Profit Protector