It came to our attention that during 2012 the HMRC or Taxman as more commonly known had created around thirty more taskforces to catch tax evaders in the UK. One of these taskforces were apparently directly targetting the motor trader.
When the news came about we had one or two car dealers pull out of their rolling contract which they are perfectly entitled to do. Although wiping your website, pulling your stock and crossing your fingers that the HMRC won't come knocking on your door is not an ideal solution.
How can I reduce my Tax Liability
Firstly, keep records of everything you buy as well as every car you sell. Remember that all money on items you spend related to the business can be offset against your profit such as:
- car valeting
- advertising
- your car dealer website
- search engine optimisation
- fuel expenses
- phone charges / internet connections
- insurance
- utilities (gas / electric / water / rates / rent
The above list isn't a comprehensive list but gives you a general idea of what you should be able to offset against your motor trade business. By offsetting the above expenses against your income will certainly help get your profit margin down to help reduce your tax bill.
Important - Always set up a business account OR a separate account which enables you to put all transactions and expenses through. Using your personal account will only confuse matters and make it difficult for you to separate and explain transactions to the HMRC should you ever have a tax investigation.
How else can a motor trader reduce their tax liability?
Also remember that by partnering with your spouse on a 50/50 basis (for example they may do all the paperwork) will also double your tax allowance pre-profit and therefore reduce your end of year tax liability.
If you are considering in starting a business in the motor trade, remember to do it properly and don't forget to give us a call on 08456 432 110 regarding your new car sales website - we won't let you down!
