Tax Breaks for Small Firms

If you have a small business, you could be missing out on thousands of pounds in tax relief.

There are many tax breaks that new entrepreneurs aren't always aware of that could help towards start-up costs, the development of various products and the day-to-day running of the business.

Out With The Old

It can cost thousands to update all, or even just some, of the equipment you use for the running of your business.

Small firms often miss out on thousands of pounds of tax relief that could help towards the costs of starting up, developing products and running their businesses.

However, these costs can be deducted from the taxable profits that the company acquires over several years.

Earlier this year, the government changed the rules surrounding first-year capital relief, increasing it from 40 per cent to 50 per cent and if your company leases machinery for more than five years then you can get tax relief for that.

There is also the opportunity to deduct the cost of any research or development. You can deduct 150 per cent of the total cost when calculating taxable profits.

Share And Share Alike

Most companies offer their employees share incentives and this, in return, allows the company access to certain tax breaks, including corporation tax relief on the costs involved in the initial set up of the shares plan.

This is known as the enterprise management incentive scheme and through this the employer can claim relief on the difference between the option price and the market price.

And when it comes to buying and selling shares, employers can also get business asset taper relief, which reduces the capital gains tax (CGT) and allows the ability to sell shares at a 10 per cent tax rate.

From The Outside In

As well as there being tax relief on things that you can do within the company, such as materials and equipment, there is also the opportunity to provide tax relief for investors into the company.

For example, the enterprise investment scheme allows unquoted companies (those not publicly listed) to raise capital from outside investors who can then claim relief.

However, when it comes to the corporate venturing scheme you are only eligible if a firm takes minority holdings in the small unquoted companies in return for tax relief.

Conserving Energy

There are tax breaks on things that don't take too much effort to achieve, particularly when it comes to recycling and energy saving (Purely Energy).

Firstly, there are allowances for using energy-saving technology within the company and for those businesses that are located on contaminated land or reside below a residential flat.

Companies can also claim relief for organising a 'ride to work' scheme. This basically means that each member of staff that chooses to ride to work instead of use public transport or drive can get a discount on their new bicycle and the company can offset the cost.

There are lots of ways that companies can claim tax breaks, most of which cost nothing to implement. For more information on how to qualify for certain ones, visit www.hmrc.gov.uk/businesses.