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Is your business reaching its year-end? Get planning now!

The next few weeks in lockdown, combined with the uncertainty of when it will end, will force many companies to alter their operations, possibly waiting until the restrictions lift to conduct business again.

However, regardless of how in-demand your products or services are currently, you must prepare for your year-end. 

Planning and reviewing all of your allowances or reliefs to minimise any tax liabilities could help your business save money and offer cash tax credits to support investment in your company.

We have included some allowances and reliefs to look out for below:

The Government announced that the temporary £1 million increase to the Annual Investment Allowance (AIA) from £200,000 is extended until 1 January 2022, to help businesses invest. 

By subtracting the full value of an item that qualifies for the AIA from a business’ profits before tax, this allowance enables firms across the UK to claim up to £1 million in same-year tax relief for capital investments in assets. 

You can claim the AIA on investments of new machinery and plant only. You cannot claim it on cars, items you owned for another reason before you started using them in your business, and items given to you or your business.

The Enhanced Capital Allowance (ECA) scheme enables businesses to invest in environmentally efficient technologies and claim 100 per cent first-year allowances, such as tax relief on investments into specific products and technology. You can deduct either the total cost or up to the published claim value of the product against taxable profits in the year of purchase. 

Only investments of new machinery and plant are eligible under the ECA Scheme, not second-hand or used.

Research and Development (R&D) credits 

R&D Expenditure Credit (RDEC) is available for larger companies plus companies who have subcontracted R&D work by a large company, to claim for working on R&D projects. The RDEC increased to 13 per cent of your qualifying R&D expenditure on 1 April 2020.

SME R&D Relief is available for small and medium-sized companies (SMEs) if they have less than 500 employees and a turnover of under £89 million or a balance sheet total under £77 million. 

With this relief, companies can benefit from an additional deduction of 130 per cent of their qualifying costs from their yearly profit, along with the original 100 per cent deduction, to make a total 230 per cent deduction. Alternatively, SMEs can claim a tax credit if the company is loss-making, worth up to 14.5 per cent of the loss.

Small Business Rate Reliefs

If your business property’s rateable value is less than £15,000, or if your company only uses one property, you can qualify for a small business rate relief, through your local council. 

With this relief, you will not pay business rates on a property with a rateable value of £12,000 or less. If your property has a rateable value of £12,001 to £15,000, the relief will go down continuously from 100 per cent to 0 per cent.

Our experts at Knights Lowe are here to help your business prepare efficiently for its year-end. For more information, contact us today.

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