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October 24th 2019

Tax planning for small businesses: popular themes

As accountants and tax advisers to small businesses, some themes come up time and time again, so I thought it might be useful to share a few of these most common themes.

Salary & dividend mix

Company owner managers have the benefit of being able to decide how they remunerate themselves with a combination of dividend and salary. Where the owner has also provided loans to the company then this offers a further opportunity by charging interest and making use of the new savings allowance. There is always a tax-optimal mix, but this changes each time HMRC alters tax rates and allowances (ie. at least annually). Many clients I come across can improve their overall net income by fine tuning their salary/dividend mix.

Claim the NIC Employment Allowance

Most businesses (except for “one-man band” companies and, from next year, companies with very large NIC bills) are entitled to claim up to £3,000 a year against any Employers’ NIC they have paid. I often come across businesses who are not aware of this relief. It is possible to go back and claim up to four years’ allowances, plus the current year, meaning a potential refund of up to £14-15,000.

R & D tax credits

Research & Development tax credits are incredibly generous, allowing a company to deduct up to 230% of actual spend on R & D against taxable profits, or claim a cash rebate if the company is loss-making. The problem is that many companies assume that they don’t qualify without ever asking the question. For the sake of a phone call it is well worth finding out.

Claim capital allowances on fixtures

Regularly businesses will incur significant expenditure on a new capital project such as a new farm building, new offices or a warehouse. Clients will often pay the purchase price and assume that as it is a building no plant and machinery allowances are available. However, often these buildings contain significant fixtures and fittings on which very valuable capital allowances can be claimed. HMRC won’t just give them to you – you need to identify and claim them and so I recommend to all clients that whenever they are in the process of purchasing such a property they contact us to see what is available.

Find out more about our corporation tax services.

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