Having a team of accountants and tax advisors available can ensure you explore and apply all legal avenues of tax saving. This process won’t happen overnight. It takes planning and analysis to understand what a business qualifies for. By working closely with the right accountant, you can ensure that your business is operating as tax efficiently as possible.
Research & Development (R&D) Tax Relief
Any business that is working to achieve advances in knowledge or capabilities, specifically in a field of science or technology, may qualify for R&D tax reliefs. The UK Government created these reliefs because it recognises that businesses working to resolve scientific or technological uncertainties are key to furthering British business on a global scale.
The relief itself works by reducing a business’s corporation tax liability. For businesses that are loss making, which some in their early stages can be, they receive a cash refund instead.
In practice, this means that an SME making a net profit of £600,000 after spending £450,000 on research, can potentially reduce its taxable profit to £15,000, thereby saving £111,000 in tax. To benefit, a business must submit a claim to HMRC.
Loss relief works whereby you get tax relief when you offset your losses against other profits in your business in the same accounting period. You also have the option to carry the loss back, but if you do not then it is carried forward to another accounting period.
Creative Industries Tax Reliefs
There are a range of reliefs applicable to businesses in the creative field that work in a manner very similar to R&D tax relief. The reliefs apply to:
- Film production
- Television production
- Video game development
- Theatre productions
- Orchestral productions
Where your business is profitable then this works by identifying the relevant expenditure and reducing corporation tax on the related profits. If your business is loss making then you may be able to surrender the loss and convert all, or some, of it into a payable tax credit.
Tax reliefs could save you thousands on your tax bill. If you haven’t yet explored these reliefs, there is no time like the present. They exist to further British businesses and encourage continued investment in our economy. They are there to be used to save your bottom line and allow you to reinvest for future growth.