Whilst there might be squeezes in the tax system there are some reliefs that are very likely to remain, as follows:
Research & Development tax relief & credits
The Government are seeking to promote innovation within the UK and R&D tax credits provide an effective incentive for companies who carry out this work. The rates of relief have been increased over recent years to make this more attractive.
Has your company spent time overcoming a difficult problem where the solution was initially uncertain? If the answer is yes, then chances are R&D is involved. Currently, every £1 of qualifying expenditure not only is tax deductible as normal but qualifies you for a further 26p off your tax bill. And loss making companies aren’t forgotten as losses can be surrendered to HMRC in return for a cash payment.
This relief was said to be one of the most under claimed and the Government were encouraging claims and approving these without review. However there has been a massive influx in the number of firms specialising in R&D relief alone and as a result some very aggressive claims have been made. Whilst we do not think that the relief will be withdrawn or reduced, the actual claims could be an area for future HMRC scrutiny.
Annual Investment Allowance
Usually when a business invests in assets such as plant and machinery, office equipment, fixtures and fittings and vehicles (except cars) the tax relief is spread over the lifetime (or longer) of the asset.
However the Annual Investment Allowance which is at its highest level to date (£500,000) enables businesses to claim 100% tax relief on qualifying capital expenditure in the year of purchase rather than spreading over the asset’s lifetime.
This allowance has steadily increased but is currently legislated to drop to £25,000 as of 1 January 2016. The Coalition Government promised to address this in the Autumn Statement and hence it appears unlikely that the limit will fall back to its previous limit.
So, in the meantime we have a window of certainty where businesses can invest with confidence knowing they can utilise the AIA whilst it is at its highest level. Timing is critical as the amount of the allowance available to you has to be calculated by reference to both your accounting period and the dates of any rule changes.
Therefore if you are considering any capital expenditure please seek full tax advice to ensure any available relief can be maximised.
If you have any questions, on the above reliefs, just contact Lesley Sutton on 01484 550 037 or email firstname.lastname@example.org for more details.