Growing a successful company can be difficult. However, there are a number of tax reliefs and strategies that, if available, can save you time and money. We set out below five suggestions that may benefit your business.
- Raising funds
The Seed Enterprise Investment Scheme (SEIS) and the slightly less beneficial Enterprise Investment Scheme (EIS) both offer income tax savings for qualifying investors acquiring newly issued shares in your company. In addition, no capital gains tax is payable when qualifying shares are sold. Both schemes are subject to numerous conditions but HMRC offers a useful advanced assurance procedure.
- Attracting and retaining employees
The Enterprise Management Incentive (EMI) scheme allows qualifying companies to grant options to employees to purchase shares in a tax efficient manner in the future. A discounted value can be agreed with HMRC to reflect the minority interest obtained. If the agreed value is paid by the employee no income tax charge should arise upon grant or exercise of the option. Shares obtained under EMI options can, in many cases, also enjoy a capital gains tax rate of 10% on any gain realised on sale.
HMRC offers a couple of schemes to simplify VAT or improve cash flow for small businesses. The flat rate scheme allows smaller businesses to account for VAT at a flat rate rather than complete detailed VAT returns. It is not cost effective for all businesses but is worth considering. Alternatively, the VAT cash accounting scheme can improve your cash flow. In this case VAT is only paid to HMRC once you have received payment, although you can only reclaim VAT once you have paid your supplier.
- Stamp duty land tax
Many leases will not fall within the scope of SDLT. However, it you are entering into a lease and SDLT is payable, consider whether it is commercially viable to enter into a shorter lease with the option to renew rather than a longer lease with a break clause. You cannot reclaim SDLT if you break the lease so a shorter lease may be more efficient if you envisage ending the lease early.
- Reducing corporation tax
Research and development (R&D) relief offers smaller companies undertaking qualifying R&D a tax relief equal to 230% of eligible expenditure. If your company cannot take advantage of the tax deduction, you can surrender the relief to HMRC for a cash sum equal to 14.5% of the surrendered relief. Larger companies can also benefit, albeit that the relief available is less beneficial.
This article is designed to highlight a number of potential opportunities that you may wish to explore. The rules can be complicated and professional advice may need to be sought. For further information or tax advice, please contact Karl Pocock or John Kahn. Law covered as at March 2019.