Year-End Tax Planning: The 90-Day Checklist

1. Why start 90 days out, not 14

Almost every useful year-end move takes time to implement. A pension contribution has to leave the company bank account before year-end and the bank does not treat a same-day BACS as reliable. A £50,000 asset ordered in month 11 might not be delivered, installed and brought into use in month 12. A dividend requires distributable reserves, a board minute, and, where it affects more than one shareholder, a joint view.

Year-end reviews that start two weeks before the date are mostly reconciliation. Year-end reviews that start three months out are genuine planning. The difference is measured in the number of decisions that are still open at the point of the review.

2. Build the Projection First

The first piece of work in a 90-day review is a full-year projection, not a tax calculation. Take the nine months of management accounts already booked, project the final three months on a realistic basis (not last year plus growth, but contract-backed), and run the whole-year P&L and balance sheet forward. The projection answers three questions at once: what is the likely taxable profit, what are the likely reserves at year-end, and what is the cash position.

Without the projection, every subsequent decision is guesswork. With it, every subsequent decision is modelled. The two hours spent on the projection are usually the most valuable two hours in the whole process.

3. Capital Decisions

With a projection in hand, the capital-expenditure question becomes tractable. Any qualifying plant and machinery brought into use before year-end can attract Annual Investment Allowance or, for companies purchasing new main-rate plant, Full Expensing at 100%. The timing effect is large: a £40,000 asset brought into use one day before year-end reduces current-year CT by up to £10,000; the same asset a day later moves the deduction into next year.

The decision is not "buy everything you can afford". It is "if a purchase is going to happen in the next six months anyway, is it worth accelerating into this year". Where the company is below the small profits rate (19%) this year and will be in the marginal relief zone next year (effective 26.5%), deferring the purchase saves real tax. Where the reverse is true, accelerating it does.

The modelling is straightforward once the projection is built. The work is making sure the decision is actually timed, invoiced, delivered, and in use by the cut-off. Leaving it to the final week is where the money is lost.

4. Extraction Decisions

Extraction planning at the company year-end is slightly different from extraction planning at the personal tax year-end (5 April). The company year-end determines whether a bonus or pension contribution can be deducted in this year's CT return. The personal tax year-end determines the individual's income band for the year.

• Employer pension contribution: deductible in the year paid, subject to the wholly and exclusively test. Must clear the bank before year-end.
• Bonus: deductible in the year accrued, provided it is paid within 9 months of year-end (s.1288 CTA 2009). Gives some flexibility on actual cash timing but the accrual needs to be formal.
• Dividend: not deductible. Timing question is about the personal tax year, not the company year, a dividend declared in March may fall in either tax year depending on when it is paid and credited.
• Salary: deductible when paid through payroll in the year. Changes to salary level generally need to be in place from the start of the tax year, not mid-year.

5. Reliefs and Losses

Some reliefs expire if unused, the short window for electing to carry back losses, the three-year window on capital allowance pool balancing charges, the time limits on group relief claims. A 90-day review is the moment to identify anything that is inside its final window and will be lost if not claimed.

The flip side is also worth checking: capital losses brought forward, trading losses in related entities, any unused AIA from an earlier year. Most reviews find at least one relief the current year's projection has not assumed, and which is worth including before it times out.

6. What to Do After Year-End

The work does not stop on day one of the new year. Anything that was deferred to the next year needs a calendar entry and a dated decision. A bonus accrued into this year but payable next needs to be paid within 9 months to be deductible. A dividend declared in the new year needs the paperwork lodged and the distribution logged.

The last move in a good year-end review is to set the date for the next one. Nine months out, twelve months out, and the same 90-day trigger. The planning discipline is worth more than any single decision inside it.