Planning, Reliefs & Incentives

Profit Extraction Planning

There are various ways to get money out of a company that don’t involve high risk artificial tax avoidance, profit extraction planning is about looking at your business interests, looking at what you want to achieve, and discussing the options available.

Looking at how much you can and would like to extract from your business comes as part of considering whether you want to extract money from your company or leave some in to reinvest into other business ventures before additional tax is taken off.

This involves looking at the tax free dividend allowance, the National Insurance charges on salary & bonuses, the withholding tax implications of interest payments, making the most of the 10% Entrepreneurs Relief rate, as well as the interaction between Income Tax , Corporation Tax, and Capital Gains Tax.

There is not one option that suits all, often a profit extraction strategy will involve a combination of the different options, planned a number of years into the future.

Reliefs and Incentives

 It is important to make sure you take advantage of the deductions available to you, which includes additional incentives made available by the Government to encourage investment in business.

We can advise on:

Relief For Goodwill & Other Intangible Assets

Goodwill & other intangibles can quickly build up inside a successful business, whether you realise it or not.  This may come in the form of a brand / brand recognition, patents, trademarks, customer lists, franchise agreements, employment contracts, and much more.

It is important to recognise these items, not only to consider the tax implications, but also to make sure your Balance Sheet identifies such items to show just how well your business is doing.

There are tax reliefs available, but the rules for goodwill and intangibles generated from within a business are complex and ever changing.

In addition to the assisting with the tax rules, we can help with understanding the key principles, identifying the intangible assets, valuations and the accountancy reporting options.

Research & Development Relief & Tax Credits

Research and Development (R&D) tax relief is a Corporation Tax relief that can reduce your company’s tax bill.

You may not be aware that your company is undertaking activities that are relevant to the R&D legislation, however you can claim for R&D projects where you are seeking to achieve an advancement in overall knowledge or capability in a field of science or technology through the resolution of uncertainty (but not simply an advance in the company’s own state of knowledge or capability).

Although it sounds complicated, the relief has been in place for many years with great benefits – your company can either claim an extra tax deduction for R&D relief, so for every £1 spent on qualifying expenditure tax relief of at least £2 is available, or even claiming a R&D tax credit if your company is making a loss – this can actually turn a company paying tax into a company which receives a tax refund.

Land Remediation Relief On Bringing Land In To Use For Development

Land Remediation Relief is a Corporation Tax relief which enables companies to claim an additional tax deduction for qualifying expenditure to help further reduce the companies tax bill, or even claim a tax credit if your company is making a loss – this can actually turn a company paying tax into a company which receives a tax refund.

Where developers or contractors are involved in projects that involve work on land that is contaminated or bringing long term derelict land back into use, there are extra tax reliefs available to claim an extra tax deduction which can be set against profits, or may even result in a tax credit being claimed to secure a cashflow advantage for the business.

The legislation was originally introduced in 2001 and has gone through changes to consider what “land in a contaminated state” is.  These are generally contaminants that are present as a result of industrial activity, but is also extended to include Japanese Knotweed, radon and arsenic.  The guidelines extend to certain types of flood defence works. 

Capital Allowances (Including First Year Allowances And The 100% Deduction For The Annual Investment Allowance)

There have been many different types of Capital Allowances over the years, Industrial Buildings Allowance, Flat Conversion Allowances, Business Premises Renovation Allowance, and more.

Plant and Machinery Allowances have consistently been the most active type of Capital Allowance claimed, however has continued to evolve and change over the years.  Allowances can easily be missed as not just expenditure on specific plant and machinery used in the business can be claimed but certain aspects of buildings can qualify, which was widened by the introduction of legislation on integral features of a building or structure in 2008.

Capital Allowances are all about making sure you are claiming a tax deduction for the costs you incur where you would not automatically get a tax deduction, whether it’s from complicated tax rules or just not identifying part of a building where relief can be claimed.  The rates may vary but can be as high as a deduction for 100% of the expenditure incurred

Enterprise Investment Schemes, Seed Enterprise Investment Schemes, and Venture Capital Trusts

These types of arrangements, when correctly applied, gives investors multiple tax advantages for investing in certain types of smaller, unquoted, trading companies – the benefits vary but gives significant advantages for both Income Tax and Capital Gains Tax.

We are here to help and discuss the benefits and risks whether you are looking to:

  • invest in an Enterprise Investment Schemes (EIS) or Seed Enterprise Investment Schemes (SEIS) set up for a particular company which you are interested in participating in,
  • invest in a Venture Capital Trust (VCT) which you believe will provide an attractive return on investment in addition to providing you the tax advantages, or
  • set up your own company and are looking to bring on additional investors to raise finance; therefore you want to consider if this company meets (or may meet) the criteria of an Enterprise Investment Schemes (EIS) or Seed Enterprise Investment Schemes (SEIS) to give investors more incentives to capitalise your new company