Becoming more effective and efficient with your taxes saves your business a lot more than you think. Deducting costs such as rent, software, travel, wages, and the like might be a step that you already take, but there is also a chance that your business could apply for some of the more targeted reliefs available. There are cuts, credits, and advantages available for businesses that innovate, invest, and improve things, be it internally or in the environment and community around them. Here, we’re going to look at some that might be worth considering.
Annual Investment Allowance And Capital Allowance
Your business may be able to deduct some or all of the cost of certain assets from your taxable profits through capital allowances, such as equipment, machinery, fixtures, tools, work vehicles, computers, and other machinery. However, beyond that, the Annual Investment Allowance might allow you to deduct the full cost of qualifying assets up front. This can make certain major purchases a lot more tax-efficient than you might initially guess. It is important to note that the AIA is capped at £1 million a year, and does apply to a somewhat smaller range of asset purchases than other capital allowances, so it’s worth seeing if a planned asset purchase qualifies before making a decision to buy it.
Structures And Building Allowance
You may already be aware of the tax deductions related to property costs that can help your business save on its rent, repairs, and utilities. However, if you’re looking to invest in a commercial property, then you might want to consider the Structures and Building Allowances, as well. Businesses that construct, renovate, or improve offices, factories, warehouses, retail units, or operational facilities may be able to claim relief on qualifying construction costs over time. Building, buying, or renovating a commercial property can be a tremendous long-term drain on projects, made more costly by taxation on expansion, but the allowance can make construction projects, such as major renovations or relocating into larger premises, more financially viable.
Patent Box Relief
If you run a business that’s led primarily by the products it designs, creates, and sells, an engineering firm, manufacturing company, or technology firm that has patentable intellectual property, then you might want to consider Patent Box Relief. It allows companies to apply a reduced 10% Corporation Tax rate to profits attributable to patented inventions. Companies have to elect in it and calculate the proportion of their profits linked to the qualifying IP, but it will give businesses yet another good reason to get their patents in place, beyond the legal protection that they can offer around their ideas, as well.
R&D Tax Credits
Even when your research and development might not immediately turn up products that you can patent and sell, there could still be tax benefits that you could apply for. If your business is trying to solve a technical question, improve a product, develop software, or create something not already available in your field, then you could potentially apply for R&D tax credits, even if yours isn’t a lab or tech startup. You can apply for this benefit if you’re seeking to advance a wide range of scientific and technological fields, but documentation is very important. Your business needs to keep detailed records showing evidence of the technical problem it’s trying to tackle, past attempts (even failed ones), as well as resources put towards the problem, such as staff time, costs, and input from contractors.
Creative Industry Tax Reliefs
Businesses that operate in creative industries, such as film, television, video games, animation, theatre, galleries, and the like, could get some extra help managing their costs. Industry-specific tax reliefs and expenditure credits exist to provide financial support that offsets development costs and improves the overall profitability of those projects, allowing businesses to reinvest savings into production quality, new projects, marketing, and other investments that can boost the quality and reach of the creative projects. These exist as a means to foster the creative community in the country, supporting cultural export, which is considered by many to be more than just a commercial enterprise, but an investment in the well-being and even the social cohesion of the people.
Land Remediation Relief
Among the tax benefits set aside for those investing in property, there is special consideration given to those businesses that are focusing on redeveloping contaminated land, or land that has been marked by previous industrial use. Companies that remove harmful substances, deal with contamination, or make damaged land suitable for commercial use may qualify for enhanced tax deductions on those clean-up costs. Not only can this help with the costs of complex development projects, but it can also serve as an incentive to businesses, allowing them to consider a wider range of potential premises locations than they might have previously thought about. As such, it can help profit margins, making it easier for businesses that are trying to adhere to goals of environmental improvement, sometimes turning projects that initially appear financially unappealing into more worthwhile long-term investments.
Pension Contributions And Employee Incentives
Businesses that invest in recruitment, retention, and long-term planning for their employees could see some financial benefits for their efforts. For instance, pension contributions made by the company are typically deductible for Corporation Tax purposes. Employee incentive schemes such as Enterprise Management Incentives (or EMI) give employers the ability to grant key staff the ability to buy company shares at a fixed or discounted price in the future, which can be very useful for businesses looking to attract and retain skilled staff without having to watch their salary costs balloon. Employees who feel financially invested in the company’s future are also often more motivated and engaged, improving loyalty and even contributing to stronger succession planning.
The tax advantages above aren’t just something worth keeping an eye out for; they should serve as an incentive if there’s a step towards innovation or investment that you want to take, but you haven’t leaped yet. They’re designed to help businesses make those big improvements all the more affordable.
