The new financial year is here, and with it came quite an increase in Corporation Tax. The rate increased from 19% to 25% for companies with a profit of £250,000 and over. With businesses already grappling with inflation, this rise is undoubtedly set to further impact them and their cash flow.
But there are options out there that might just help you reduce your Corporation Tax bill and thrive despite the changes. Let’s take a closer look…
1. Claim R&D relief
Your business could be missing out on saving a huge £25,000 for every £100,000 spent innovating, thanks to the government’s Research and Development relief scheme for science and tech. This offers tax relief to companies developing new or improved products, processes, and software – as well as those that pay technical staff to find solutions to technical challenges.
There are two different types of R&D relief: one for SMEs, and another for large companies. The SME scheme requires a business to have fewer than 500 members of staff and a turnover of less than €100 million or a balance sheet total under €86 million. Large businesses can be eligible to claim for R&D expenditure credit if they’ve been working on R&D projects. This can also be claimed by SMEs too, if a big company has subcontracted them to carry out a research and development project.
All you need to do is check your eligibility. It’s worth noting that this relief can’t be claimed for the arts, humanities, and social sciences – including economics.
2. Reinvest in plant and machinery
Thanks to the annual investment allowance, businesses can claim tax relief on the purchase of specific assets within a certain spending limit. As a result, your business could potentially write off a huge amount of qualifying investment against your profits.
Here’s the criteria for your company to qualify:
- Be actively using old and new assets in your business
- Be trading legally as a business when you sell the old assets to buy new ones
- Purchase the new assets within three years of selling or disposing of the old ones (or up to one year before)
3. Invest in training
By pouring investment into training and development schemes, whether they be internal or external, businesses are able to deduct these related expenses from their profit calculations.
What’s more, this can only add further value to your company as you enhance the skill set of your workforce. You’ll improve their career options too, which can aid employee satisfaction, productivity, and retention.
4. Up your pension contributions
An often overlooked but great and simple way to minimise your Corporation Tax is increasing the pension contributions for both the company’s employees and directors.
Before considering this option, bear in mind each individual’s tax position. Be sure to also make the payments before the end of the accounting period.
5. Declare all business expenses
Significant reductions to your Corporation Tax bill can be made by ensuring you declare all your company’s allowable business expenses. Whether this is the raw materials used to create a product or your marketing and promotional costs, a lot of money can come straight back into your business.
Other expenses you can claim back include:
- Operational costs
- Market research
- Buying products for resale
- Discounts to retailers and wholesalers
- Product storage, distribution, and logistics
Work strategically with Nabarro Poole
Running a business isn’t just stressful – it can consume a lot of your time too. If you’re finding that minimising your Corporation Tax bill isn’t necessarily something you can fit into your hectic schedule, Nabarro Poole can help.
We support companies of all sizes, across a range of industries, to work smarter and reduce their costs. Our experienced team will take the time to understand your business inside and out, before determining what will work best for your circumstances. Learn more about our services and get in touch with us today.
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