More and more frequently, the news headlines contain reports of taxation schemes in a negative light. However, there are many tax reliefs advocated by HMRC in place for small companies which can be used to save tax through clear and authorised methods.

One such scheme is Research and Development (R&D) relief. This is an extremely attractive taxation relief which is available to many trading companies, subject to certain criteria, where research and development is conducted.  Many owners have heard of this, but few actually realise that costs which have been incurred are eligible for this relief.

There are various tests which are applied in determining whether a company has incurred any R&D expenditure. Crucially, R&D activity is distinguished by the test of whether there is presence of an appreciable element of innovation. If the activity departs from routine and breaks new ground it is likely to be included. However, if the activity follows an established pattern it is normally excluded.

If expenditure does qualify as R&D, and the company is eligible, the tax relief available is extremely generous. 230% of the total eligible expenditure is deductible for corporation tax purposes. In addition to this, if the company is loss making, the company can claim a tax credit immediately, thus improving cash flow.

Here at Frost Wiltshire, we can talk through the company expenditure with you and establish whether we believe the company is eligible for R&D relief. We can then complete and submit your claim for you, which will include a full report plus calculations.

We offer a range of services outside of R&D claims, and as such can take on all your business and personal compliance needs alongside this more specialist area if you would like us to.

Because we offer a range of services outside these claims, we are able to provide this service at a highly competitive price.

If you are interested, please contact Mel Hackney or Steve Wiltshire to arrange a free initial consultation.

 

Mel Hackney gives an overview of the forthcoming changes and why small business owners should be reviewing their remuneration strategy

From April 2016, the income tax rate of dividends is increasing. This means that if you are a shareholder and have adequate distributable reserves within your company, now is the time to consider declaring dividends in order to make your distributions as tax efficient as possible.

The tax rate of dividends at a basic rate level has been at an effective rate of 0% for a number of years. However, from April this year, this rate is increasing to 7.5% – still lower than the rate of tax applied to employment and self-employment income, but the effect is to make dividends less tax efficient than they were previously.

There are many tax efficient ways for a shareholder of a small business to extract profits without relying purely on drawing dividends, and if you think this is an area where you might need some guidance, we would be very happy to help. Please contact Mel or Steve to set up a meeting.