Corporation tax is the principal charge that a limited company or enterprise should pay. Corporation tax should be paid both on the company’s profits and any increases from selling resources that have expanded in esteem. Sole dealers and associations don’t settle for corporation tax; however, they instead cover income tax (on business benefits) and capital gains charge (on any addition from the offer of resources).
Unfortunately, due to COVID-19 hanging on our necks for the past two years, paying our expenses has become difficult. This article will help you understand the ways of availing Corporation Tax Reliefs created through the loopholes of tax reforms.
Corporation Tax Reliefs
Capital allowances guarantee capital use can be expensed against your yearly pre-tax income. Hence, you ought to review the consumption you’ve incurred on your business property to decide if you meet all requirements for capital allowances. This permits you to think back truly, too as the case doesn’t need to be made when the expenses were brought about. This implies you could guarantee missed allowances going back quite a while.
Source: Claim capital allowances
The Annual Investment Allowance (AIA)
The Super Deduction
Certain expenses can help you keep the business running, which means they can claim them by deducting through the income while calculating profits. HMRC provides a list of allowable business expense, which includes;
- Stock bought for resale
- Purchase of raw materials
- Salaries of all employees
- Employers’ National Insurance Contributions (NICs)
- Employer pension contributions
- Business insurance
- Business-related travel and accommodation
- Training fees
- Accountancy costs
R&D Tax Relief
If you want to know more on this relief, you can read this link on the complete guide set by the HMRC
Business Asset Rollover Relief
When you sell a business resource, your organization gets obligated for corporation tax on the chargeable profits. However, by reinvesting the returns from the deal into acquiring another resource that is utilized only for business purposes, you might be qualified to concede the tax payment. The relief must be availed within four years of the end of the tax year you bought a resource. For example, if you sell or dispose of the old asset in May 2019 and buy the new asset in June 2021, you need to claim relief by 5 April 2026.
Source: Business Asset Rollover Relief
“You get tax relief by balancing the loss against your business’s different gains or profits in the same accounting period.”
You can likewise decide to convey the loss back. If you don’t, it will be conveyed forward to another accounting period.
The Patent Box
If your business creates benefits from licensed items or services, you could lessen your tax liability. The Patent Box Tax Regime works by permitting you to bring down your company charge obligation (tax liability) to 10% for profits that can be ascribed to licenses that create income in the UK and Europe. You might be wondering who can get benefit from patent box?
You can get benefit if your company is;
- Liable to Corporation Tax
- Making a profit from exploiting patented inventions
- Owning exclusively licenced-in patents
- Undertaking qualifying development on the patents
A Staff Party
Employer Pension Contributions
Employee Share Schemes
“The deductibility of costs will rely on the sort of employee sharing scheme the organization operates.”
You might have the option to get an allowance in corporation tax if you utilize a passing employee share scheme. Please make certain to look for counsel on which plots this applies to and which one is most appropriate to your business conditions.
Source: Tax and Employee Share Schemes
Employee Share Acquisitions
“If a loan is given, it won’t qualify; nonetheless – it must be a gift.”
There are additional restrictions on the sum that can be asserted should you get a non-financial thing as a trade-off for the gift – tickets or passes, for instance. Tax relief must be asserted for the accounting period frame during which the payment is made. It confines the measure of corporation tax profit accessible for that period. A gift/donation to a foundation cannot be gained to make a loss for Corporation Tax purposes.
Creative Industry Tax Reliefs (CITR)
Seven diverse assessment reliefs are accessible for organizations inside the creative enterprises. These increment the degree of permissible use guaranteed and possibly offer a tax reduction to qualified organizations such as:
- Film industry
- Video Games industry
Corporation Tax Penalties
It’s imperative to comprehend the regular slip-ups that can prompt a penalty. You might get a penalty by HMRC in the following cases
- Return errors
- Delayed payment
- Non-availability of proper records
- Late filing of tax return
“Your Corporation Tax return is paid within the 12 months of your accounting period only if you’re a limited company”
The deadline to pay your Corporation Tax bill is usually nine months and one day after the end of your accounting period. Following are the penalties for your novice behavior by the HMRC;
For Late Tax Returns:
Following penalties have been set by HMRC if you are late for filing the tax return:
- £100 fine being late for one day
- Another £100 fine for three months
- After a period of six months, HMRC will evaluate your bill and add a 10% penalty onto what it considers your unpaid tax will be
Late corporation tax payments
If you file a company tax return and it’s found to be inaccurate, HMRC may fine you. How much you have to pay depends on whether HMRC believes the mistake was deliberate, whether you tried to hide it, and whether you voluntarily admit to it before HMRC finds out. If HMRC decides:
This article sets out the UK business tax ramifications of the 2019 novel coronavirus infection (COVID-19) flare-up, which has set off worldwide limitations on movement, changes in working practices, and issues of income and liquidity for business. It incorporates changes to different HMRC practices and systems set off by COVID-19, just as considering issues under existing tax enactments that may emerge (or turn out to be more intense) because of the unique conditions and financial circumstances.
We have helped make you understand the basic means of availing corporation tax reliefs and tax penalties. If you have more queries, contact us at Legend Financial, as we have a competent team to help you get through managing your finance and making new investments.
Business Tax: Claim Capital Allowances. (n.d.). Retrieved from Gov.Uk Website: https://www.gov.uk/capital-allowances
Capital Gains Tax: Business Asset Rollover Relief. (n.d.). Retrieved from Gov.Uk Website: https://www.gov.uk/business-asset-rollover-relief
Charities, Volunteering and Honours: Tax relief when you donate to a charity. (n.d.). Retrieved from Gov.Uk Website: https://www.gov.uk/donating-to-charity
Corporation Tax: Use the Patent Box to reduce your Corporation Tax on profits. (2020, May 7). Retrieved from Gov.Uk Website: https://www.gov.uk/guidance/corporation-tax-the-patent-box
Corporation Tax: Work out and claim relief from Corporation Tax trading losses. (2021, June 9). Retrieved from Gov.Uk Website: https://www.gov.uk/guidance/corporation-tax-calculating-and-claiming-a-loss
Income Tax: Tax and Employee Share Schemes. (n.d.). Retrieved from Gov.Uk Website: https://www.gov.uk/tax-employee-share-schemes
Reliefs: Creative Industry tax reliefs for Corporation Tax. (2018, February 15). Retrieved from Gov.Uk Website: https://www.gov.uk/guidance/corporation-tax-creative-industry-tax-reliefs