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As the economic conditions improve, the landscape for business growth is potentially highly favourable.
There are a variety of tax reliefs and incentives that are on offer both to help a business grow and to reward the entrepreneur when they come to sell or close their business.
Virtually every business that employs staff is eligible for the Employment Allowance which reduces the amount of Employer’s National Insurance contributions by up to £2,000 each tax year. Once a business has registered for the scheme, the Employment Allowance is intended to be automatic and perpetual.
The Annual Investment Allowance has been raised to £500,000 for a temporary period ending on 31st December 2015 when it will revert back to £250,000. The AIA applies to capital purchases with the exception of:
– Cars
– Assets previously used for another purpose
– Assets gifted to your business
– Expenditure in the accounting period in which your business ceases
If your business does purchase a car, there is a Capital Allowances available the level of which is determined by the CO2 emissions of the car. For cars purchased in the 2014-15 tax year, these are:
– Over 130g/km qualifies for the Special Pool rate of 8% per annum.
– Between 95g/km and 130g/km qualifies for the Main Pool rate of 18% per annum.
– Less than 95g/km qualifies for a 100% allowance in the year of purchase if the car is new or the Main Pool rate of 18% per annum if the car is second-hand.
To encourage growth and innovation, small businesses are eligible for a 225% tax relief on Research and Development spending.
For each £100 of qualifying costs, the business would have the income on which Corporation Tax is paid reduced by an additional £125 on top of the actual £100 spent.
In broad terms, this R&D relief is available on projects designed ‘to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty.’
In a similar vein, The Patent Box enables a company to apply a lower rate of Corporation Tax to profits earned after 1st April 2013 from its patented inventions. The current lower rate of Corporation Tax to be applied is currently 10%.
Finally, when a business owner decides to sell all or part of the business or to close their business, they can qualify for Entrepreneurs’ Relief that reduces the level of Capital Gains Tax to 10%.
There is no limit to how many times you can claim Entrepreneurs’ Relief. However, there is a cap on the amount you can claim during your lifetime that currently stands at £10 million of relief.
In addition, there are strict deadlines to claim Entrepreneurs’ Relief. For instance, for a business sold or closed in the 2013-14 tax year, the claim must be made by 31st January 2016.
Entrepreneurs’ Relief in normally claimed as part of the Self-Assessment Tax Return. However, in certain circumstances, it can be claimed separately.
At CooperFaure, we have extensive knowledge of government-funded schemes and incentives for SMEs and sole traders, including those for the creative sector.
If you would like to discuss your circumstances or have any questions, please contact welcome@cooperfaure.co.uk to arrange an initial free consultation.