Business Tax Planning Reliefs
BUSINESS TAX PLANNING RELIEFS
In the first weeks of this pandemic, many businesses concentrated on cash management, making sure they took advantage of all available government funding. Schemes you may be familiar with, or have used, include:
- The Coronavirus Job Retention Scheme
- Corporation tax deferral
- Deferral of PAYE through HMRC’s Time to Pay
- Business rates grants or holidays
- The Business Interruption Loans Scheme
As you move from the response phase towards the management phase of the pandemic, it is time to introduce longer-term strategies to help strengthen your cash flow.
Key areas to focus on:
- Time to Pay – HMRC
- R&D Tax Credits
- Corporation Tax Repayments
- Share Options
- Raising Funds
- Pension Schemes
HMRC TIME TO PAY ARRANGEMENT
You may already have deferred PAYE liabilities for three months, but when those liabilities are due in June, your business will face another cash squeeze.
For many, the solution will be to secure a more detailed VAT Time to Pay agreement with HMRC, supported by a cash flow forecast, repayment plan and evidence that other sources of funding have been exhausted.
R&D TAX CREDITS
This offers SMEs corporation tax relief for the costs of research and development (R&D). It’s an opportunity for many businesses to generate significant cash payments from HMRC, allowing you to:
- Deduct 230% of your qualifying costs from your yearly profit
- Claim a tax credit worth up to 14.5% of surrenderable loss
The scope of R&D is wide, and the kind of changes that could qualify for relief include:
- Upgrading computer systems
- Efficiency improvements
- Product changes
Claims can also be accelerated to help cash flow, with a potential turnaround time of six weeks between starting work and receiving the cash payment.
CORPORATION TAX LOSS RELIEF
In this current accounting period, you could find yourself in a loss-making situation. Losses can be carried back and set off against profits of the preceding period, allowing you to receive repayments of last year's corporation tax – even if the current accounting period has not ended.
Larger businesses may also have the opportunity to reclaim quarterly instalment payments already paid.
CUT TAX ON SHARE OPTIONS
Setting up an employee share option, or Enterprise Management Incentive (EMI), scheme lets you reward key staff members – helping boost loyalty – without an immediate cash cost to the business.
EMI arrangements have significant tax advantages for the option holder and the exercise of most employee share options also results in an immediate corporation tax deduction for your company.
SHAREHOLDERS AND INVESTORS
Many companies are likely to need additional funding to get through this current crisis. Shareholder loans could be an option, or you could pursue further subscriptions for shares from existing shareholders or new investors.
If the conditions are met, the equity subscription could qualify for the Enterprise Investment Scheme (EIS), giving the investor 30% income tax relief on the investment and capital gains exemption on the ultimate disposal.
USING PENSION SCHEMES
Pension schemes can be used in a variety of ways to support your business through the crisis.
Some pension schemes can borrow to buy commercial property from the business, providing a means of funding the company. Alternatively, owners could access 25% of their pension fund tax-free, helping them improve cash flow to support the business.
Additionally, in very specific circumstances, certain pension schemes can lend to companies.
BUSINESS SUPPORT & ADVICE TO HELP YOU THROUGH
We can provide support in all areas of tax, allowing you to make informed decisions about your tax position with advice that delivers sustainable, risk-managed, effective tax strategies for the long-term.
If you would like to know more about business tax reliefs and how we can support you in strengthening your cash flow, please don’t hesitate to contact us.