ALLOWANCE (AIA) & SUPER-DEDUCTION
You can currently claim up to £1million of AIA for expenditure incurred on qualifying plant and machinery up to 31 March 2023. If you are thinking about big expenditure in the future, make sure you make use of this relief before the limit is set to decrease from 1 April 2023. Provided your qualifying expenditure is within the limits of AIA you
can write off 100% of the costs against your profits in the year of purchase.
Alongside this there is also the superdeduction which is a new type of capital allowance introduced in response to
the coronavirus pandemic, however, it is only available for companies. This is a 130% deduction on qualifying plant and machinery or 50% on anything that qualifies for special rates. To claim this allowance the expenditure must be on brand new assets not second hand and is only available until 31 March 2023.
ELECTRIC CARS AND ENHANCED CAPITAL ALLOWANCES GENERALLY
Running your car through the business, has long been inadvisable due to the high benefit in kind rates. However, electric cars may be worth considering. You will get a 100% deduction for the purchase cost if buying a new vehicle (i.e. not second hand) in the first year under enhanced capital allowances and the benefit in kind rates are relatively low at 2% for 2022/23 – 2024/25.
More generally, enhanced capital allowances are available on all energy efficient technologies and allow your business to claim 100% first year allowances (FYA). Meaning you can deduct the full cost of the expenditure in the first year. Saving tax on the amount spent. Enhanced allowances are available in addition to the annual allowance,
therefore if this has been fully used on other expenses you can claim FYA on anything that qualifies here, with no limit.
What qualifies:
• electric cars and cars with zero CO2 emissions
• plant and machinery for gas refuelling stations, for example storage tanks, pumps
• gas, biogas and hydrogen refuelling equipment
• zero-emission goods vehicles
• equipment for electric vehicle charging points
• plant and machinery for use in a freeport tax site, if you’re a company
STRUCTURES AND BUILDINGS ALLOWANCE
You can now claim 3% straight line writing down allowance on new commercial building expenditure that does not qualify for relief elsewhere. All construction contracts must have been signed on or after 29 October 2018.
PENSION CONTRIBUTIONS (LIMITED COMPANIES)
Companies can make pension contributions into your pension scheme and save up to 25% (from April 2023) with relief from corporation tax as they are a deductible business expense. This is provided the overall level of remuneration the director receives which includes salary, dividends, bonuses, benefits in kind, pension contributions
etc. is commensurate for the work being done.
CLAIM FOR COSTS OF WORKING FROM HOME
Where you work from home HMRC allow you to claim a proportion of you home expenses or a fixed rate deduction. Make sure you make this claim in your tax return to reduce the tax you pay.
EMPLOYMENT ALLOWANCE
You may be able to reduce your Employers NIC bill by £5,000 a year if you claim the employment allowance.
To qualify you must be a business or a charity with an employee class 1 NIC liability of less than £100,000 in the previous tax year.
However, a single director company does not qualify for this relief.
ENSURE YOU CLAIM ALL BUSINESS-RELATED EXPENDITURE
Although obvious it’s worth mentioning. Have you paid for items on your credit card or from your personal bank account for the business? Make sure you claim the money back from the company and get tax relief on all qualifying
expenditure.
SMALL BUSINESS RATES RELIEF (SBRR) – ENGLAND
Make sure you are claiming SBRR if you qualify. SBRR reduces your rates bill to zero if you have:
• One property with a rateable value of less than £15,000 or
• Or if you have more than one property:
» none of your other properties have a rateable value above £2,899
» the total rateable value of all your properties is less than £20,000 (£28,000 in London)
If your property’s rateable value is more than £15,000 but less than £51,000 you will still receive some relief from the full rates due.
CHARITABLE DONATIONS (LIMITED COMPANIES)
If you make contributions as an individual unless you are a higher rate taxpayer you do not get relief on your personal tax return, though the charity can claim back gift aid.
If you also own and manage a company you should consider making the contributions through
the company, if they qualify you will be able to deduct the amount paid from your profits before calculating any corporation tax due.
RESEARCH AND DEVELOPMENT RELIEF (R&D) (LIMITED COMPANIES)
Is your business breaking ground and doing something innovative and new?
You may be eligible to claim R&D relief.
For Small and medium sized enterprises (SMEs) you can deduct an extra 130% from your profits of the qualify costs. That’s on top of the deduction already made for the expenses!
CREATIVE INDUSTRIES TAX RELIEFS (LIMITED COMPANIES)
This is actually a group of 8 reliefs that work in a similar way to R&D Relief. If you qualify you can claim up to 100% of enhanceable expenditure and reduce your taxable profits. Again, if your company makes a loss, you may be able to surrender the loss and convert some or all of it into a payable tax credit.
Enhanceable expenditure is the lesser of qualifying UK expenditure or 80% of the total qualifying expenditure.
The 8 creative industry reliefs are:
• Film Tax Relief
• Animation Tax Relief
• High-end Television Tax Relief
• Video Games Tax Relief
• Children’s Television Tax Relief
• Theatre Tax Relief
• Orchestra Tax Relief
• Museums and Galleries
Exhibition Tax Relief
If you would like to discuss how your business can save money then get in touch.
Alex Dent
Senior Tax Manager
