Unconventional Tax-Saving Strategies for UK Businesses

Working tirelessly but ending up paying a significant amount in taxes causes a lot of frustration, especially when some people always figure out a way to pay less tax. Yes, there must be some way of reducing it. As a result, many taxpayers are now actively looking for a solution. Of course, they want to save their hard-earned money, but it’s not easy. So look at some unusual tax-saving strategies that might work for your UK business. So let’s have a look.

Explore Research and Development (R&D) Tax Credits

If your company is working on some innovative project that has something to do with either science or technology concerning your business, congrats! You are eligible to get generous tax relief from the government. This can be anything like working on some innovative product or service. It can be also an improvement on an existing product. Moreover, this tax relief is also of two types-

Small and Medium-sized enterprise R&D tax relief

R&D expenditure credit

Under the small and medium-sized enterprise R&D tax relief, Small and medium-sized enterprise (SME) R&D tax relief, as an owner of an SME, you became eligible to claim for a deduction of an additional 86% of their qualifying R&D expenditure while calculating their taxable profits. This is on top of the regular 100% deduction, which means 186% deduction. As a result, the taxable profit of your company is reduced resulting in reduced corporation tax liability.

However, R&D expenditure credit is typically used by larger companies or those that do not qualify for SME R&D tax relief. It is speculated that soon both tax reliefs will merge into one offering a relief of 20%. 

Take Advantage of Annual Investment Allowances

 
It is a tax relief provided by the UK government that you can avail of if you have invested in qualifying assets in your business. It allows you to deduct the full value of qualifying plant and machinery expenses from the taxable profits of your business, and that too up to £1m.

Here it must be noted that the plant and machinery that qualify for this allowance include business-related assets like vehicles, certain bathroom and kitchen fixtures, expenses incurred in dismantling, removing, or disposing of plant and machinery assets, and integral parts of a building like electrical system, air purification system, etc. 

Since this allowance amount may vary from one year to another, it is best to check with the HMRC to make sure that you are maximizing your eligible tax relief.

 
Consider Incorporation Relief
 

Are you transferring your business to a company to get a hold of some shares of that company? If yes, and you are also a sole trader, you can delay the payment of your capital gains tax (CGT) until you dispose of the shares via the incorporation relief. Even if you are in a business partnership, you can apply for this relief. 

 
Optimize Pension Contributions

 
What about making contributions to your employee pension? This may sound unconventional, but in this way, you will be able to save a remarkable amount of tax! This pension will be treated as an allowable expense, because of which the corporation tax bill of your business will get reduced.

 
Claim Capital Allowances 

Going green is not just a trend but a way to promote sustainability. It can aid you in decreasing your taxes by enabling you to claim capital allowances. So, buy low-carbon technology for your business and pay less tax. 

Learn about international tax planning

If your business operates internationally, strategic tax planning can help minimize your overall tax burden. Consider structuring your operations in tax-efficient jurisdictions to ensure compliance with the help of skilled UK accountants or tax consultants.

Seek Patent Box tax relief

If you have a business that generates income from patented products or patented techniques, you are eligible for this tax relief. This will lower your corporation tax. In short, instead of paying the standard corporation tax rate of 19%, you can pay a corporation tax of 10%. Remember that even if your business has some medicinal or botanic innovation rights, it can avail the tax relief. 

Finally, let’s admit that reducing tax liability is not a daunting task anymore! By exploring these unconventional tax-saving strategies, you can minimize your tax burden. So stay informed, and in case you need any personalized tax advice for your business, do not hesitate to consult our team of experts.