Tips From Accountants In Hemel Hempstead: 9 Legal Ways To Save Corporation Tax
The United Kingdom has some of the most intricate corporation tax regulations globally. While there are effective and legal methods for reducing corporate tax liability, comprehending these strategies and their optimal application can be daunting. As a leading team of accountants in Hemel Hempstead, at Tax Accounts Solutions, we understand the challenges faced by businesses in this endeavour. That is why we have crafted this comprehensive blog to thoroughly examine nine such useful strategies, providing you with insights into how they operate to help you choose the exemptions that align with your business.
Corporation Tax Saving Tips From Accountants In Hemel Hempstead:
- Capital Allowances
Capital Allowances stand as a potent tool that can significantly reduce your Corporation Tax burden. This tax relief, applicable from the day of purchase, allows your company to deduct the cost of assets from its taxable income over several years. You can choose between gradual write-offs or immediate one-off allowances, depending on the type of asset your company has acquired.
In addition to Capital Allowances, Enhanced Capital Allowances also offer 100% upfront tax relief for energy-efficient purchases, providing you with an added incentive. Entrepreneurs’ Relief further facilitates reduced tax rates when disposing of assets, enabling you to manage your finances more efficiently.
- Research & Development (R&D) Tax Relief
The second tax saving strategy suggested by our accountants in Hemel Hempstead is opting for R&D Tax Credits. It presents a great opportunity for your business in Hemel Hempstead to claim tax relief on innovative projects that your company undertakes to enhance its products, processes, or services. This incentive, introduced in the early 2000s, covers up to 33.35% of your company’s R&D spend, offering a notable reduction in Corporation Tax or a cash repayment. Regardless of your company’s size or industry, if it is engaged in qualifying research and development activities, you can potentially benefit from R&D Tax Credits, while fostering innovation.
- Structural Changes
As a business owner in Hemel Hempstead, you can also strategically leverage structural changes to achieve legal reductions in Corporation Tax. Merging multiple companies under the same legal entity can help lower your tax rates and increase deductions. You can also transfer assets or staff between entities without triggering Corporation Tax liabilities in the UK for additional tax savings.
Moreover, if you are a part of a larger organisation, you can take advantage of group relief rules, which provide opportunities to offset losses between entities, giving you substantial annual savings on Corporation Tax payments.
- Transfer Pricing
Our accountants in Hemel Hempstead advise utilising Transfer Pricing as a legal strategy to reduce Corporation Tax. This requires your company to price transactions between subsidiaries in different countries to shift profits to lower tax jurisdictions.
The key here is to set Transfer Prices at arm’s length, reflecting the reality of market conditions. To avoid incompliance, you should assess your company’s performance against established benchmarks, secure independent valuations for intangible assets, and confirm that its Transfer Pricing (TP) policies align with the guidelines set by the OECD for Multinational Enterprises and Tax Administrations. You must also understand HMRC’s Transfer Pricing Adjustment rules, which include topics such as audits, disclosure requirements, penalties, and dispute resolution services.
Establishing robust governance procedures within your company is essential for ensuring compliance with relevant laws and regulations related to Transfer Pricing in the UK.
- Investing In Enterprise Investment Schemes (EIS)
Companies in the UK can strategically invest in Enterprise Investment Schemes (EIS) to legally reduce their Corporation Tax liabilities. This scheme allows your company to defer taxes for up to three years post-investment and receive income tax relief of up to 30%. Notably, profits you gain by selling EIS shares are exempt from capital gains tax after three years, giving you twofold benefits for reducing Corporation Tax. As per our accountants in Hemel Hempstead, you can take advantage of this strategy regardless of the size of your business and allocate a portion of your company budget for EIS investments, fostering financial growth and tax savings.
- Offsetting Losses
Offsetting losses is a valuable strategy for companies in the UK that helps them reduce their corporation tax bill, particularly during challenging times. This process allows you to apply losses from previous years against future profits, effectively lowering your current corporation tax obligations. With the ability to carry forward losses for up to nine years, this strategy allows your business to recover from unforeseen setbacks. However, careful documentation and adherence to specific rules are essential to ensuring the effective utilisation of Offsetting Losses.
- Utilising Capital Gains Tax Reliefs
Our accountants in Hemel Hempstead suggest leveraging Capital Gains Tax Reliefs to legally reduce your Corporation Tax by capitalising on exemptions and allowances. Business Asset Disposal Relief and annual exempt amounts offer you significant reductions in chargeable gains from asset sales. You can also utilise the Gift Hold Over Relief option for Capital Gains Tax by transferring your taxable assets to another person. However, it is crucial to have a comprehensive understanding of available reliefs to allow your company to legally minimise its Corporation Tax cost on qualifying asset sales or ownership transfers and avoid incompliance.
- Invoicing Expenses Separately
According to our accountants in Hemel Hempstead, by implementing this strategy, your company can issue separate invoices for overhead costs to ensure these expenses are not included in your taxable income calculations. This gives your company a substantial reduction in its taxable profit margin while preserving adequate levels of cash flow. The invoicing method is exempt from Value Added Tax (VAT) as it is related to overhead costs and is separate from sales transactions.
If you wish to take advantage of this powerful tool to minimise your Corporation Tax liabilities, all you need is compliance with HMRC rules for deductible expenses and meticulous record-keeping.
- Claiming Overseas Losses & Credits
If your company is engaged in international operations, claiming overseas losses and credits is a strategic approach that can legally reduce your Corporation Tax. It allows your business to offset foreign exchange rate losses, international tax liabilities, and other costs incurred. This gives you the opportunity to claim losses incurred in overseas jurisdictions due to external factors, providing a practical means of optimising tax efficiency and enhancing financial stability.
By claiming foreign tax credits for profits earned in multiple countries, your company can effectively reduce Corporation Tax liabilities in the UK.
Navigating the complexities of Corporation Tax in the UK necessitates strategic financial planning for businesses. The nine legal strategies outlined in this guide provide you with a roadmap to navigate these complexities and optimise your tax position. While each strategy offers unique advantages, a tailored approach based on expert advice is crucial to avoid incompatibility. By opting for these exemptions, you can reduce your Corporation Tax burden and thus fortify your company’s financial future, allow better resource allocation, and ultimately achieve greater success in the long-term.
Ensure Maximum Savings On Corporation Tax With Tax Accounts Solutions
Looking for efficient and expert Tax Accountants in Hemel Hempstead? Look no more! We are here to help you unlock substantial tax savings for your business! From Capital Allowances to Overseas Losses & Credits, our accountants at Tax Accounts Solutions can guide you through strategic financial planning and secure a prosperous future for your organisation. With more than 30 years of experience, we are a trusted choice for 350+ companies for ensuring compliance and optimising tax positions. Visit us today for personalised tax support to maximise your savings.