QUESTION: It's only two months to the end of the tax year and I'd like to reduce my tax liabilities. Are there any tax planning opportunities I should be aware of which will reduce my 2013/14 tax bill?
ANSWER: Now is an ideal time to reflect on the potential tax planning opportunities which are available for 2013/14.
While cash-flow and credit constraints are on the minds of many, the pending tax year end on April 5 2014 provides an opportunity to ensure that your personal tax liability for the 2013/14 tax year is no greater than necessary.
It is important to take advantage of the various allowances and exemptions which are available to individuals. You may wish to look at using your annual capital gains tax (CGT) exemption before April 5 or alternatively if you have already used your exemption, by deferring a disposal until after April 5 you will delay the tax payment date by 12 months.
If you have any investments which have fallen significantly in value since you bought them, you might want to consider selling some of these assets. You can then offset the capital loss arising on these disposals against capital gains you have incurred in the 2013/14 tax year. It is also possible to offset capital losses on the sale of certain unquoted share disposals against taxable income which is not capital in nature.
Many individuals are taking advantage of the current market conditions by making gifts to the next generation of assets which have fallen in value, to reduce their exposure to Inheritance Tax (IHT). A disposal of such assets at their low value limits your CGT exposure as the deemed proceeds which are taken into consideration by HM Revenue & Taxes in calculating your capital gain is likely to be much lower than if you had gifted the assets in previous years.
It is important to review your pension position and ensure that you are making full use of this year's pension relief. It is also worth reviewing your investments to ensure that you are utilising tax free investments which are available, such as ISAs.
If you have income producing investments, you should ensure both spouses' basic rate tax bands and annual allowances are being utilised. If not, it may be beneficial to transfer some investments into your spouse's name.
The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) provide significant tax benefits to investors. The EIS offers investors a 30 per cent income tax shelter and also a capital gains tax deferral benefit. The SEIS offers similar tax reliefs, however the income tax relief is given at a higher rate of 50 per cent.
If you have incurred a capital gain in the last three years it is possible to claim a refund of this tax by making a cash investment into an EIS company, if the relevant conditions are fulfilled.
If you make your investment before April 5 this year you may also qualify for income tax relief in the current year, if you fulfil the various conditions.
Finally, if you wish to make a charitable gift before the April cut-off you should ensure that the charities you support are provided with Gift Aid declarations to ensure that you can claim tax relief on your donation.
Before making investments or carrying out tax planning strategies, we recommend that you seek advice from your financial advisor or tax specialist. Planning opportunities are not suitable for everyone and specific advice should be sought.
n Janette Burns (j.burns@fpmca.com) is tax partner at FPM Chartered Accountants (www.fpmca.com). The advice in this column is specific to the facts surrounding the question posed. Neither The Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.