Making the most of tax allowances to fuel business growth

If your business is ready to grow there are a number of tax allowances to support the journey.  Here's an overview of key ones that are often missed.

October 2019

Make full use of investment allowances
Businesses can claim tax relief on most capital expenditure (e.g. machinery, IT systems, cars etc). The annual investment allowance (AIA) gives you a 100% deduction from your taxable profit in the year of purchase for the majority of assets (but not cars).

The allowance now stands at £1million from 1 January 2019 to 31 December 2020, with special rules for years straddling those dates. In addition to the AIA, there are further tax-free allowances for energy-saving equipment such as solar panels, lighting, some heating and air-conditioning systems etc. If you need new equipment to support your business growth, consider timing the purchase to make the most of your allowances each year.

Consider if you qualify for R&D tax credits
If your business is developing or improving materials, processes, products, formulae, environmental products and other such activities, do consider if the work qualifies for research and development (R&D) tax credits. These can work as a deduction from profit or as an immediate tax repayment in exchange for surrendering the loss. They can therefore have big cashflow advantages.

Check your business structure aids growth
If your business is part of a group structure, don’t forget if one subsidiary in the group makes a loss, but another makes a profit, the loss can be switched to the profit-making company to reduce the corporation tax liability on the profit. There are qualifying criteria for the group to do this, to ensure the ownership percentages are not prohibitive.

Tackle bad debt for unpaid fees
As you approach your year-end, don’t forget you can write off bad debt and get tax relief on it. Review your debtors list and any action you have taken to recover each debt. Then decide  whether you should be writing this off. There’s no need to carry around bad debts that go back years – it’s much more effective for your company’s long-term wealth and growth to write  this off and get the tax relief.

New buildings allowance 
And if you are looking to purchase or refurbish premises in the coming year, watch out for a new structures and buildings allowance (SBA). Applying from 29 October 2018, it gives 2% flat rate relief over 50 years for building work on most non-residential buildings and structures, either for ownoccupation or investment.

Specific advice should be obtained before taking action, or refraining from taking action, in relation to this summary, if you would like advice or further information, please speak to your usual Shipleys contact.

Copyright © Shipleys LLP 2019

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