Did you know that there are a number of special taxes your company might be eligible for in the United Kingdom? In this blog post, we will go over 11 different types of UK taxes that your business might be able to take advantage of. Keep reading to learn more!
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Patent Box
To encourage businesses to develop and exploit patented inventions, the Patent Box allows companies to apply a reduced rate of corporation tax on profits that arise from patents. For example, a company can pay just 10% Corporation Tax on their profit from a patented invention.
Capital Allowances
This allowance enables businesses to deduct the cost of certain equipment purchases from their taxable income. The equipment must be used for business purposes only and must be depreciable assets such as machinery or vehicles. For example, if a company bought a delivery vehicle, they could deduct the purchase price from their taxable income.
Research & Development (R&D) Tax Relief
If your company is involved in any type of research and development (R&D), you may be eligible for R&D tax relief. This involves claiming back some of the costs associated with the R&D activities undertaken by your company. For example, the cost of materials, software, staff and subcontractors can be claimed back.
Seed Enterprise Investment Scheme (SEIS)
If your company is involved in start-ups, you may be eligible for SEIS. This allows investors to receive a 50% income tax relief on investments up to £100,000 per year. For example, if an investor puts £20,000 into a start-up business, they can receive £10,000 back in tax relief.
Enterprise Investment Scheme (EIS)
Similar to the SEIS, EIS offers tax relief for investing in small companies that are less than seven years old and have fewer than 250 employees. It also provides a 30% income tax relief on investments up to £1 million per year. For example, if an investor puts £20,000 into a start-up business, they can receive £6,000 back in tax relief.
Patent Royalties Relief
Companies can claim a 100% deduction of patent royalties when it comes to corporation tax calculation. This means that any royalties paid by other companies for using your patented inventions are not subject to corporation tax. For example, if a company paid you £500 for using your patented technology, this would be an income of £500 with no corporation tax implications.
Employment Allowance
Companies can claim up to £4,000 per year off their Employer’s National Insurance Contributions (NICs). This allowance is available for companies that have not exceeded the threshold of £100,000 in total Employer’s NIC due in the period before the start of the tax year. For example, if a company has £90,000 of Employer’s NIC due in this period, then they can still claim up to £4,000 off their next year’s bill.
Innovation Relief
If your company has developed something that is new and innovative for your industry, you may be eligible for innovation relief. This allows companies to deduct up to 50% of the costs associated with developing a new product or service from their corporation tax bill. For example, if a company spent £2 million on developing a new product, they could potentially deduct £1 million from their taxable income.
Capital Gains Tax Relief
If your company has made capital gains from the sale of an asset, it may be eligible for Capital Gains Tax relief. This allows companies to pay reduced rates of tax on any profits earned from the sale of assets such as land, property and shares. For example, if a company sold some land for £20 million, they could pay 10% CGT on the gain instead of 20%.
Corporation Tax Deferral Opportunities
If your company is struggling with cash flow, it may be eligible for corporation tax deferral. This means that you can delay paying the amount of tax due until a later date. For example, if your company was due to pay £20,000 in corporation tax on 1 April 2022 but couldn’t afford it, they could request a deferral and pay the amount due at a later date.
HMRC Christmas Party Allowance
Companies can pay up to £150 per employee without incurring any tax liabilities. This amount is intended to cover the cost of a seasonal party or gathering held for employees. For example, if your company has 20 employees and you decide to hold a Christmas party for them, you can pay up to £3,000 without any tax implications. However, the HMRC Christmas party allowance does have a few more qualifying criterias.
As you can see, there are lots of special taxes for companies that many may not know about but can potentially save them a lot of money. It’s worth taking the time to familiarise yourself with these so that you can make sure you’re taking advantage of all available opportunities to reduce your business’s taxable income. Who knows, with the right knowledge, you could potentially be paying a lot less tax than you thought!
