By Ross Martin, Accountancy Director at Hive Business

As you might have heard, it’s 20 years since the Spice Girls’ first hit. Makes you realise how much has changed, and how much nicer life is without those awful songs playing on the radio all the time. But some things haven’t changed enough.

I have genuinely heard about dental principals and their spouses being advised that they should be able to live off £80k.

Granted, £80k is a particularly tax-efficient sweet-spot for a husband and wife company, but in one case this advice was being proffered even though the husband and wife had £200k profit.

The advice therefore, whether intentional or not, amounted to some kind of ideological diktat. Tell me, on what planet is it right for a professional advisor to guide people to reign in their drawings when they don’t need to?

I’m sorry, but a financial advisor like that has got the wrong end of the stick about their job. It’s the client who gets to be dogmatic, and the advisor who digs and sweats and finds a way of working it.

Can you guess why an advisor might tell you you’re better off sticking to that £80k sweet-spot? Rather obvious isn’t it? It’s easier for them.

I also know about a practice owner who went to their accountant asking what to do because their ‘director’s loan account’ had run out; the accountant was at a loss.

We used to do a work thing, golf competitions on Saturdays, and you could always tell who’d been hitting the driving range through the week to analyse their swing. Although more fun, it was a little like business finances. If your accountant’s tax advice is limited to things like “only draw £80k a year” or “I don’t know”, they haven’t been practising enough.

With successive rule changes, extracting cash from your company is becoming more difficult with the corollary that, without good proactive advice, your choices are polarised into:

• Take out the funds to use them but pay the (increasing) tax rate
• Use tax efficient tactics which often lock the cash away for a period of time (eg pensions or EIS investments)

If you want to avoid either of those, you’ll need to mount a strategic and fluid defence against ‘death by a thousand pricks’ from the taxman, which requires a team effort from you and one or more expert advisors.

It’s time to accept that we’re living in the 21st century and we know finances aren’t just housekeeping, they facilitate or block everything businesses do. Tax advisors can’t operate like they did even 10 years ago when retroactive tax planning was possible, there’s just too much change afoot (just look at pension regulations).

Practice owners need advisors who have a mindset that fits the era we’re in. Advisors certainly shouldn’t allow themselves to be bullied by the taxman into providing advice that ignores the goals and aspirations of their client.

If you want to be an Olympic medal cyclist today you can’t turn up and do what you did in 1996. Your business, too, is up against a more sophisticated set of challenges.

Which isn’t a problem, as long as you know what you Wannabe (sorry) and invest in decent support. If your accountant sees you quarterly, does your books on the cloud and, critically, provides close support year-round, there’s no reason your tax position can’t serve your 21st century goals.

Call Ross on 01872 300232 or email us at hello@hivebusiness.co.uk.