Manage cashflow with superior tax planning
James Dawson shows how tax and cashflow are closely inter-related and points out some opportunities you just might have missed.
With a downturn in the economy and some uncertainty surrounding the UK’s position after Brexit, many companies are turning their attention to tax planning – especially if cashflow is becoming an issue. Here are some different areas that are worth thinking about and, of course, discussing with your professional advisers.
Research & Development
Companies involved in qualifying R&D activity, may qualify for tax relief on certain costs incurred as part of the process. If you’re a small or medium-sized enterprise, this results in additional relief of up 130% on costs incurred. Where a company has made a loss in the year the benefit of this relief allows Small and Medium enterprises to surrender tax losses generated by R&D tax relief for a cash repayment.
Patent Box Relief
Innovating in your market place with new, patented technologies or inventions? Patent Box Relief allows you to access a lower rate of Corporation Tax on the profits derived from the exploitation of patented technologies and products. While the qualifying criteria is complex, companies can see their Corporation Tax liabilities significantly reduced to as low as 10% on these profits, where this relief is available.
Don’t overlook this advantageous relief. Capital Allowances are often a valuable relief assisting in reducing a company’s taxable profits, generating deductions of up to 100% of the qualifying capital expenditure incurred. If you have incurred significant expenditure on property renovations in the previous 2 years, a review of the expenditure should be undertaken to maximise any Capital Allowances available which could result in significant tax savings for companies.
Some companies are facing the prospect of making a current year tax loss. If a company has previously been profitable and paid Corporation Tax in the prior period there is the potential to utilise current year losses against prior year’s profits and generate a tax repayment.
Foreign Tax Credits
If you are undertaking work overseas, you may find that you suffer withholding tax on payments received. What you may not realise is that you can claim relief against UK Corporation Tax on a pound-for-pound basis for any withholding taxes which have been suffered potentially generating a repayment. This claim can be made for a period of up to four years, in some cases allowing companies to access significant tax savings.
Tax-efficient remuneration and benefits
We always encourage our clients to think about what savings can be made in other areas of their business. Staff costs will typically be a significant cost to most companies, therefore any savings that can be accessed in this area are usually welcome. Simply changes like moving to an alternative provider for your Corporation Benefits package can result in significant cost savings for a company as well as some tax efficiencies for your employees as well, for example moving to a salary sacrifice pension scheme.