Utilise capital allowances
Most day to day business expenses can be deducted from business income when calculating your taxable profits. However, the rules are different for ‘capital’ expenditure.
The new super-deduction tax break applies on qualifying capital asset investments from 1 April 2021 until 31 March 2023 and allows businesses to deduct 130% of the cost of any qualifying investment on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances. This means that for every £1 businesses invest they can reduce their tax bill by up to 25p.
An enhanced first year allowance of 50% on qualifying special rate assets has also been introduced for expenditure within the same period. This includes most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances.
SME R&D Tax Relief
The Research and Development (R&D) tax credits scheme offers businesses the ability to invest in new technologies and scientific development in exchange for generous tax reliefs. Businesses investing in R&D projects can benefit from a significant reduction in their Corporation Tax bill.
Small and Medium-sized Enterprises (SME) can claim R&D tax credits of 230% on qualifying expenditure. This effectively means that for every £100 a company spends on qualifying R&D, they can deduct £230 from their profits when calculating profits chargeable to Corporation Tax. For loss making companies using the SME scheme the tax credit is fully payable (subject to certain restrictions).
Flat Rate Scheme annual review
Using the VAT Flat Rate scheme, businesses pay VAT as a fixed percentage of their VAT inclusive turnover. The actual percentage used depends on the type of business. The scheme has been designed to simplify the way a business accounts for VAT and in so doing can reduce the amount of VAT to be paid as well as reduced administration costs of complying with the VAT legislation.
The scheme is open to businesses that expect their annual taxable turnover in the next 12 months to be no more than £150,000, excluding VAT.
The cost of a staff party or other annual entertainment is generally allowed as a deduction for tax purposes. If you meet the various criteria outlined below then there is no requirement to report anything to HMRC or pay tax and National Insurance. There will also be no taxable benefit charged to employees.
An annual Christmas party or other annual event offered to staff generally is not taxable on those attending provided that the average cost per head of the function does not exceed £150. Note, that the event must be open to all employees and there can be more than one annual event.
All costs including VAT must be taken into account. This includes the costs of transport to and from the event, food and drink and any accommodation provided.
If you would like more information on any of these tax reliefs, please get in touch.