To stay competitive in the automotive sector, financial efficiency is just as important as technical precision. OTO Pro Advisors Ltd provides the following five tax-saving strategies tailored for small automotive firms and fleet managers:
1. Optimize Capital Allowances on Fleet Acquisitions.
The automotive business is asset-heavy. Instead of viewing vehicle purchases simply as expenses, leverage Capital Allowances. By properly classifying your fleet (from delivery vans to service vehicles), you can deduct a significant portion of the cost against your taxable profits over several years.
2. Utilize the Small Business Tax Exemption
Under the current Finance Acts, small businesses with an annual turnover below a certain threshold (currently ₦25 million) are exempt from paying Company Income Tax (CIT).
* The Strategy:While you may be exempt from CIT, you must still file your returns on time to maintain your Tax Clearance Certificate (TCC), which is essential for securing corporate contracts and government permits.
3. Claim Deductions for Technical Training & Development
The automotive industry is evolving rapidly with electric vehicles (EVs) and advanced diagnostics. The cost of training your mechanics and administrative staff is a fully tax-deductible business expense.
* The Benefit: By investing in “Topklass” training for your team, you improve your service quality while simultaneously lowering your taxable income.
4. Implement Proper “Input VAT” Offsetting
Many automotive businesses pay Value Added Tax (VAT) on spare parts and equipment (Input VAT) and charge VAT on their services (Output VAT).
* The Strategy: Ensure you are meticulously tracking your “Input VAT.” You can often offset the VAT you paid to suppliers against the VAT you collected from customers, ensuring you only remit the net difference to the tax authorities.
5. Strategic Timing of Maintenance & Repairs
In a profitable year, it is often wise to pull forward necessary facility upgrades or major equipment maintenance into the current financial year.
* The Reason: These are considered allowable expenses. By timing these repairs before the end of your accounting period, you can reduce your net profit for that year, thereby lowering your tax liability while ensuring your shop is in top shape for the year ahead.
Disclaimer
Oto ProAdvisors Ltd wishes to state that “The information provided on this website is for general informational purposes only and does not constitute legal, financial, or professional tax advice. While Oto Pro Advisor Ltd strives to provide accurate and up-to-date content, tax laws and regulations (including FIRS guidelines and Finance Act provisions) are subject to frequent changes and varying interpretations. Application of these strategies depends on your specific business circumstances. We strongly recommend that you consult with a qualified tax professional or reach out to our team for a formal **tête-à-tête before implementing any tax planning strategies. Oto Pro Advisor Ltd hereby disclaims any liability for actions taken based on the information provided.
