As UK business owners, understanding how to reduce your company’s tax liability is crucial in maximizing your hard-earned cash. The continuously changing tax rules and regulations can make navigating the complex tax system challenging, but with a few simple actions, you can minimize your tax obligation. Here are some helpful suggestions for businesses looking to lower their tax burden in the UK this year:
1. Capital Allowances:
Leveraging capital allowances can significantly reduce your corporation tax. This tax break allows you to deduct the cost of assets from your taxable revenue over several years. You can choose between spreading the cost over time or claiming a one-time credit for capital investments. Different assets have varying rates; for example, fixtures and fittings have lower rates than operational machinery or equipment. Additionally, Enhanced Capital Allowances offer 100% upfront tax relief for energy-efficient purchases that meet HMRC requirements. Entrepreneurs’ Relief is another option, providing a 10% tax rate reduction on profits from asset sales. Utilizing capital allowances is a fantastic way to organize your finances and lower your corporation tax liability.
2. Research & Development (R&D) Tax Relief:
R&D tax credits enable you to write off expenses for innovative projects that enhance your goods, services, or business models. This incentive provides a substantial tax rebate on qualifying R&D expenses, covering up to 33.35% of your company’s R&D costs. Every UK company, regardless of size or sector, is eligible for this relief if they engage in qualifying R&D activities and are registered for UK Corporation Tax.
3. Changes in Structure:
Structural changes can help reduce your Corporation Tax formally. By combining multiple businesses under one legal organization, you can benefit from reduced tax rates and more favorable deductions. Moving people and assets between corporations strategically can also lead to tax savings. Larger firms may benefit from group relief provisions, allowing them to offset losses across entities and lower their overall Corporation Tax liability.
4. Transfer Pricing:
Formally lower your corporation tax by using transfer pricing. This involves pricing transactions between subsidiaries or connected parties in different countries to shift earnings from higher-tax jurisdictions to lower-tax ones. To achieve this, ensure that transfer prices are fair and accurate representations of market conditions, complying with OECD’s Transfer Pricing Guidelines.
5. Enterprise Investment Schemes (EIS) Investment:
EIS investments can significantly lower your corporation tax and improve your overall financial performance. Through this program, businesses can receive an income tax reduction of up to 30% and defer taxes for up to three years after investing. Selling EIS shares after holding them for over three years exempts any earnings from capital gains tax, providing a double benefit for reducing your corporation tax.
6. Utilizing Capital Gains Tax Reliefs:
By utilizing specific exclusions and allowances, you can legitimately decrease your corporation tax when selling assets like stock or real estate by certain dates. Gift Hold Over Relief allows postponing CGT by transferring ownership of a taxable asset to a third party, deferring the gain until the item is eventually sold.
7. Dividends Postponed:
Postpone dividend payments until after the tax filing deadlines to decrease your Corporation Tax. This helps in better cash flow management and lower taxes on declared dividends, preventing double taxation.
Conclusion
In conclusion, these tax-saving strategies offer UK businesses various opportunities to reduce their tax liability. From capital allowances to R&D tax relief, each technique has its advantages. Staying informed about tax law changes and seeking advice from tax experts can ensure that you make the most of these opportunities while remaining compliant with tax regulations. Implementing these strategies will lead to higher profit margins, improved cash flow, and enhanced financial stability, making your business more competitive in the market.
How Acenteus can help you SAVE TAX
If you’re a UK business looking to implement effective tax-saving strategies and navigate the complexities of the ever-changing tax landscape, Acenteus is here to assist you. As a trusted provider of tax planning services, Acenteus offers expert guidance and personalized solutions tailored to your specific business needs. Our team of experienced professionals can help you optimize capital allowances, claim R&D tax relief, explore structural changes, and make the most of other tax-saving opportunities available to your company. With Acenteus by your side, you can confidently lower your tax liability, maximize your hard-earned cash, and ensure compliance with all relevant tax regulations. Contact us today to learn how Acenteus can support your business in achieving its financial goals through effective tax planning.
