Tax preparation specialist urges small businesses to ensure they are making the most of tax reliefs available to them
Many small and medium sized businesses are unaware of the tax relief options available to them, potentially missing out on tax breaks which could make them more competitive in a challenging market. David Redfern, tax preparation specialist and Managing Director of DSR Tax Refunds Ltd has issued his guide to the tax reliefs available to SMEs (small and medium enterprises) to increase awareness of the methods by which businesses can improve their profitability and increase their chances of long-term success and growth.
Capital Allowances, and in particular the Annual Investment Allowance (AIA), are available to all businesses using traditional accounting methods rather than cash basis accounting. AIA allows businesses to deduct the full value of asset purchases from profits before tax. Redfern states “Most plant, machinery and business apparatus is eligible for this relief, with the exception of business cars and other assets which were either owned prior to the business start-up or were gifted to the business although these might still be eligible for writing down allowances, which allows a business to deduct a percentage of the asset value from the profits for each year. Utilising your capital allowances efficiently is essential for making your business tax-efficient”. The AIA amount was temporarily increased by the government to £1 million between 1st January 2019 and 31st December 2020, with the intention of stimulating business investment in the UK economy. Writing down allowances on business cars are dependent on their CO2 emissions.
In addition, smaller businesses can make use of Employment Allowance to lower Class 1 National Insurance bills by £3,000 per year, via their payroll software, and may also be eligible for Small Business Rates Relief, which is available for business properties with a rateable value of less than £15,000. This operates on a sliding scale with no business rates applicable for business properties with a rateable value of less than £12,000 and then rising on a sliding scale up to £15,000. Redfern added “There are other rates reliefs which may be more applicable, including Rural Rates Relief, Charitable Rate Relief and Retail Discount, as well as Enterprise Zones. Businesses should check whether they meet eligibility criteria”. Business rates relief is usually only available to businesses with only one business property.
As well as the universal areas of tax relief, there are a number of industry specific tax reliefs which may be open to your business depending on its nature. R&D Relief is available to research and development projects working towards innovation on science and technology, with SME R&D Relief particularly relevant to small businesses with less than 500 staff and a turnover of less than €100 million. Projects looking to advance science and technology could be eligible although they need to relate to the business’ trade, either in an existing business or a start-up company. Businesses in the creative fields could be eligible for Creative Industry Tax Relief (CITR), which is applicable in different forms, to businesses working in film, high-end television, children’s television, animation, video gaming, theatre as well as orchestras and museum and gallery exhibitions. Redfern stated “Whilst these tax relief’s won’t be available for all businesses, if your small business is within one of the qualifying fields – whether science and technology, or one of the creative fields – there can be considerable deductions made for qualifying costs and expenditure so it is worth investigating whether your business is able to take advantage of these reliefs”.
For those businesses who are looking at their finance options, a form of venture capital scheme known as a Seed Enterprise Investment Scheme (SEIS) is available for companies with less than 25 employees and who have less than £200,000 in assets, which have been trading for less than 2 years. Redfern stated “While the SEIS isn’t a tax relief as such for the business, due to the tax relief it offers to investors, it can be a great way for new businesses to attract investment”. For those companies trading for longer than 2 years but less than 7 years, the government Enterprise Investment Scheme can still be used to attract investors. Redfern added “During challenging trading times, applying the full range of tax reliefs available to a business will aid the success of the business”.
About DSR Tax Refunds Ltd
DSR Tax Refunds Ltd are a firm of tax rebate specialists serving clients nationwide. DSR Tax Refunds are tax preparation experts who specialise in identifying potential allowable expenses for tax rebates for clients. Their specialist team can help employed and self-employed subcontractors with all relevant paperwork to ensure their claim is handled in an accurate and efficient manner.
For more about DSR Tax Refunds, visit https://tax-refunds.co.uk/
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