9 Things You Need to Know About Corporate Tax Planning
Corporate tax can be very expensive. Britain’s currently experiencing a cost of living crisis, inflation, and massive employment. If you are a business owner, then you are likely experiencing some degree of financial difficulty. With April just around the corner, you’re likely dreading having to pay your tax bill.
Fortunately, there are some very effective ways that you can reduce your corporate tax bill, from hiring a trained and qualified accountant to applying for specific discounts and exemptions. This article will explain how you can plan to pay your corporate tax bill and reduce it significantly.
1. Hiring An Accountant
Out of all of the suggestions featured on this list, hiring an accountant is definitely the best. The reason for this is that a professional and specialist accountant will be able to calculate expenses that can be made exempt from your final tax bill, as well as apply for other discounts that you may be eligible for. Unless you’re a trained accountant, there’s no way that you will be able to apply for these things. Additionally, according to the chartered accountants from Suretax, taxes in the UK change frequently. An accountant will stay ahead of any changes, ensuring that your tax bill is as low as possible.
2. Patent Box Relief
If your business makes profits from patented inventions, then it may be possible for you to claim patent box tax relief and pay a rate of 10% corporation tax on those profits. You could also claim R&D tax relief. It’s likely that you have never heard of either of these things, which further goes to show that you need a trained accountant to handle your business’s tax returns for you. There are myriad HMRC exemptions that you could potentially be entitled to, but without professional help, you won’t be able to realise them.
3. Deadlines
Remember, just because you didn’t claim tax relief for an expense from last year, that doesn’t mean that you can’t still claim it. You have up to two years from the end of an accounting period to claim certain tax reliefs, including R&D tax reliefs, patent box relief, and capital allowances. It’s definitely worth doing your research and seeing whether or not you were eligible to claim any of these exemptions in your last tax year. You may be able to bring down your corporation tax for this year, by claiming last year and getting a rebate.
4. Machinery
Each year, HMRC allows businesses to benefit from their annual investment allowance, which allows businesses to claim tax relief on purchases of business assets up to a specific limit. The annual investment allowance limit increased to £1 million on January 1, 2019. If your business qualifies, then you will be able to write off a significant amount of investment from your profits. Again, it’s likely that an accountant or trained bookkeeper will be better at determining what you can write off. It’s always best to leave it to the professionals.
5. Capital Allowances On Property
You are allowed to claim a 2% allowance on new commercial building expenditure, as long as the claim was made after 29 October 2018. The figure has risen to 3% for claims made post-April 2020. It is also important to extensively study the expenditure incurred so that you can determine whether it qualifies for any other capital allowances. The claim does not have to be made when the costs were incurred. Instead, claims can be made going back several years, sometimes more. It’s important to speak to a professional about this, in order to receive their advice and guidance.
6. Business Expenses
You mustn’t ever forget that you are entitled to claim back any business expenses. Company directors regularly incur expenses on behalf of their business but do not claim them back when they file their tax returns. This is something that you need to get into the habit of because it can bring down your tax bill significantly. If there are any expenses incurred by you for your business, such as taxis, meals, and petrol, then you are able to claim them back as a business expense. Do not try to exaggerate expenses or claim things that were not business expenses, however, or you could get into trouble.
7. Pension Contributions
It’s usually the case that businesses are able to make deductions from their profits for pension contributions, paid into pension schemes on behalf of employees or directors. Payments have to be made before the year’s accounting ends and cannot take place several years later. This is a very effective way of reducing one’s corporation tax. It also ensures that a sizeable pension is set up, waiting for you when you reach old age. Many people do not think about their pension or retirement, often resulting in them suffering later on in life.
8. Work From Home
When you are working from home, you are able to claim back some money for home expenses, such as heating, lighting, and electricity (but only in your work area). You may also be able to claim money for increased internet charges, insurance, and telephone calls. Again, all of this can be discussed and researched by a trained accountant, who will be able to determine whether or not you are eligible to claim back any home expenses. Many people have been working from home because of the pandemic, so it’s definitely worth considering this if you have been stuck at home.
9. Loss Relief
Make sure that your business claims all of the loss reliefs that are available to it. Businesses can suffer many different types of losses, some of which can be claimed back on your tax return. It is also possible to claim a previous year’s losses under some circumstances.
Finally, you might also want to consider throwing a staff party. You’re able to throw a staff party annually, with up to £150 per head, completely tax-deductible. This is a very effective way of rewarding one’s staff while saving money on one’s tax return.
Taxes aren’t getting any cheaper. With inflation on the rise, tax hikes are due to arrive this coming tax year. It’s important to discuss your options with a professional accountant, who will be able to strategise and tailor a plan to your business.