Many businesses are caught in a rough place when it comes to paying their corporate tax bill: they want to reduce it as much as possible, but they know the reputational danger that can occur if the public thinks the business is committing tax avoidance or fraud. Plus, businesses want to maintain profitability while keeping HRMC audits at bay. The sweet spot lies in lowering your tax bill through 100% bonafide ways, so here are a few of the best ways you can lower your tax bill without compromising your reputation.
Claiming business expenses
Most businesses claim their basic expenses, like paying for production parts or labour, but that only scratches the surface. Be aware of dual-purpose expenses, such as vehicles and phone plans used for both business and personal use. Utility and service costs also fall under this category, so make sure you are taking advantage of every opportunity to claim an expense. Be sure to keep valid and comprehensive documentation that records the exact costs that you claim; should the HRMC come knocking with an audit notification, you need to be prepared.
Utilising Annual Investment Allowance
AIA (Annual Investment Allowance) is a part of the capital allowance system that helps companies deal with large expenditures by providing tax relief. For most businesses, an amount up to £200,000 can be claimed for things like premises renovation or large machinery purchases. Be sure to check out the HRMC’s publications on capital allowances to make sure that you are getting all the tax credit you are entitled to.
Apply for R&D tax credits
R&D (Research and Development) is a crucial part of the growth process for many businesses. The government wants to encourage R&D because it is the part of a business that brings new technology and change, all of which signify a healthy economy. R&D tax credit is available to all business, big or small, regardless of the industry so long as their research meets some basic requirements. Your research doesn’t even have to be successful in order to be eligible to apply. Applying for and getting this tax credit could significantly lower your tax bill.
“By filing early, your business will gain this back interest, plus you won’t be surprised when the deadline approaches.”
Be timely when it comes to taxes
By organising your business’ finances well ahead of time and filing your taxes early, you are provided with two benefits: back interest paid out by the HRMC, plus the ability to see your financial trends and take action sooner. The HRMC provides back interest to business who file before their accounting period (up to 6 months and 13 days before the deadline). By filing early, your business will gain this back interest, plus you won’t be surprised when the deadline approaches.
If you are unsure how to minimise your corporation tax bill, one of the best choices you can make is to reach out to an accountant. They can provide you with invaluable advice as to how to ensure your bill is as low as possible without getting yourself into trouble