With an economic downturn upon us and belt-tightening the order of the day, now is a good time to make sure that your business is as tax-efficient as possible. Such a strategy will make you better prepared for disruption during the bad times and more competitive during the good ones.

Unfortunately, there is no magic bullet that will work for each and every organisation; the UK tax environment is just too complex for that. But by addressing some basic issues (see box), keeping on top of recent changes and making judicious use of experts, virtually every business can make its tax planning more efficient.

One of the easiest ways of minimising your tax bill is to make sure that you are using all of the allowances available to you. Unless you are a tax expert, it is a good idea to find one you can develop a working relationship with.

Using all of your allowances each year means checking bank and building society accounts, looking at your investment portfolio, addressing inheritance tax and capital gifts, and taking account of any relevant changes to your circumstances and the tax regime. Entrepreneurs' relief may come with a £1m lifetime allowance but it has to be claimed and a little professional advice can go a long way.

A good tax adviser will tell you when you need to review your tax situation, but it's something you should do no less than once a year. If it is going to be an annual event you should do it in the last quarter of the tax year so you can take maximum advantage of your allowances.

You also need to review your investment portfolio and make sure you are using your capital gains tax exemption to minimise inheritance
‘A good tax adviser will tell you when you need to review your tax situation, but it's something you should do no less than once a year. If it is going to be an annual event you should do it in the last quarter of the tax year'
tax on an annual basis. If you are a basic rate taxpayer this year but are likely to pay tax at the higher rate next year, close your bank and building society accounts before 5 April 2009 and open new accounts. If you do this you will receive interest to the date of closure, and will be taxable in this tax year at the basic rate tax, as long as the interest doesn't tip you into the higher-rate band this year.

Choosing a partner
Although many businesspeople see their bookkeeper or accountant as a necessary evil, when they understand your business and your personal circumstances, they can do a lot more than help you to keep proper financial records and stay on the right side of HMRC. But choose carefully: an accountant who prepares your tax return once a year may be less cost-effective than a bookkeeper who acts as a financial manager on a day-to-day basis. Their familiarity with your business enables them to support you in your forward-planning, prevent you from making costly mistakes and advise you on the most efficient or low-cost option in many scenarios.

Tax legislators are constantly moving the goalposts, and it is a full-time job just keeping track of what's going on. Many businesses that were lured into incorporation by tax incentives may now want to consider disincorporation. Moving your limited company business into an unincorporated, sole tradership or partnership is not a small undertaking, but the current tax environment and the complex requirements of limited companies can outweigh the benefits, so it's important to know what is best for you and your business. Now is also a good time for family businesses to look carefully at the way they are structured, for tax purposes and operationally.

Company owners have long been able to legitimately cut their tax bills by employing family members to help out in the business, but this is going to be a lot more complex in the future because of government plans to eliminate what it calls ‘income-shifting'. New rules to prevent this are subject to further consultation and have been deferred until 2009, but they promise to make tax planning significantly more complicated for many family businesses, and if you want to minimise the impact - and the inevitable increase in tax liability - you will need to start planning sooner rather than later.

The new Construction Industry Scheme is another area where inadequate forward-planning can have a significant negative impact. Government attempts to improve compliance in this area have created a minefield for affected taxpayers: late filing can lead to a punitive fine and a simple mistake or miscalculation can result in the loss of gross status. If you want to challenge either of these you will almost certainly need the support of a professional, and their advice can prevent many problems from occurring in the first place.

Reducing exposure
Staying on the right side of the tax man is becoming increasingly complex, but with the right support you can avoid costly mistakes and
‘Businesses with a turnover of less than £150,000 can benefit by joining the flat-rate VAT scheme before they reach the threshold. Many small businesses will find joining this can make them more profitable'
make the system work for, rather than against, you. A bookkeeper or accountant who understands your business and personal financial situations can help you to minimise your tax burden in all sorts of areas, and can identify ways of using the tax system to your advantage. Witness the following scenario involving a married couple with cashflow problems.

As the end of the tax year approached, the husband discovered he had a huge tax liability and no money to pay it, while his wife was due a refund. They saw this as an insurmountable hurdle, but their tax adviser had no such qualms. When you file for repayments electronically the money often comes back quicker than with the paper-based system, so the wife's return was filed electronically as early as possible and the refund arrived in time for the husband to use it to pay his tax bill.

It can be tempting to try to keep your business finances as simple as possible and avoid any unnecessary involvement with professional advisers or HMRC but it can sometimes be in your best interests to do the opposite. Take value added tax (VAT). You don't need to register until your taxable supplies (in the past 12 months or less) exceeded the VAT registration threshold of £67,000, but doing so before you reach this point can be to your advantage.

Businesses with a turnover of less than £150,000 can benefit by joining the flat-rate VAT scheme before (or after) they reach the VAT threshold. How much your businesses could benefit from this scheme depends on the trade sector it operates in, but a great many small businesses and start-ups will find that joining this optional scheme can actually make them more profitable. You can investigate the possibilities yourself by wading through the VAT section at www.hmrc.gov.uk or asking your bookkeeper or accountant to explain it. If you don't feel comfortable doing this, it's probably time to find a different adviser.

You must be able to trust your accountant to provide you with the best advice for your business and guide you through the ever-increasing quagmire of tax-related regulations. But to do this you will need to pull together and that is something that is only possible if you can hold a meaningful conversation with them using terminology you understand.

Don't forget, you are paying them to make tax less taxing, not to blind you with science. The ability to work together to plan ahead is absolutely vital if you want to keep your tax planning as efficient as possible and make sure you are adequately prepared for the financial future, whatever it may be.

Malcolm Trotter is chief executive of membership and examining body IAB Qualifications for Business. For more information see www.iab.org.uk