When you’re running a limited company, you’ll want to save on costs wherever you can. For many business owners, part of this is planning the tax you expect to pay.
In reality, most companies are charged the same rate of corporation tax – at 19% for 2018/19.
However, there are a number of allowances and reliefs out there to take advantage of.
Not making use of these could give an inaccurate picture of your company’s actual profits, meaning you pay more tax than you really need to.
1) Claim capital allowances
A new computer or a piece of machinery could make all the difference to your business, but it can also be expensive.
Assets that you keep for your company, such as equipment, machinery and vehicles, can be claimed as capital allowances.
For most – but not all – of these assets, you can deduct the full cost from your profits before tax using the annual investment allowance.
This allows you to deduct costs up to a limit of £200,000 every year.
2) Don’t forget expenses
It might be hard to keep track of everything you use for the purposes of your business, but it pays to maintain those records.
The general rule is anything that’s “wholly and exclusively” for business use can be claimed as an expense.
So the costs of running an office, travelling as part of your business operations, advertising and marketing your business could all count as allowable expenses.
This can also include salaries, pension contributions and employer’s national insurance contributions.
3) Check your reliefs
Too many businesses miss out on tax savings that could make their operations much easier, simply because they don’t realise they could qualify.
There are a number of corporation tax reliefs that are designed to encourage and support industries that are making exciting advances or innovations.
Research & Development
Companies that undertake innovative projects in science and technology could be rewarded with research & development (R&D) reliefs.
This could be a project that has looked for an advance in a certain field or tried to overcome uncertainty.
It doesn’t have to be an entirely new discovery, and could instead improve an existing process, product or service. It doesn’t need to be a traditional science, either.
For example, an area like software development offers plenty of opportunities for R&D projects – though it can be hard to know what’s eligible.
If you’re not sure if your project qualifies, it’s worth talking to an expert. We can assess whether you could be eligible for R&D relief, and make claims for your company.
Find out more about our R&D service.
If your company owns a patented invention, and makes a profit on it, you could be able to apply for a lower rate of corporation tax through patent box relief.
Your company needs to own or exclusively license-in the patents or must have undertaken qualifying development on them.
Qualifying companies can reduce their corporation tax rate to 10%.
Reliefs for creative industries
There are 8 different corporation tax reliefs that could apply to companies in creative industries, such as theatre, film, television, animation or video games.
These allow companies to claim a larger tax deduction, or in some cases claim a tax credit.
Get in touch
Tax planning for your company can seem like a mountain of work, but we’re ready to climb it with you.