Once you have dealt with the basics there are very few ways to save Corporation Tax. Tax saving tips are often about being super organised with what you claim and making sure you get the basics correct.
With this in mind here are some of the basics you should be looking out for:
Claim Business Expenses
It may sound obvious but the number one tip is claiming all allowable business expenses. If a cost relates to the business then claim it. Many business owners end up paying things personally because they get in the habit of using the wrong card or not claiming their business mileage. Get out of that habit now it is costing you money. If an expense is for business the get the receipt and claim it back.
Timing of Capital Purchases
If you are thinking of investing in Plant and Machinery then do it sooner rather than later, The Annual Investment Allowances allows 100% of the cost of equipment against your Corporation Tax.
If you are thinking of a company car then you should look at a hybrid as these are also 100% allowable at teh time of this post. Beware though when you sell the car some of this Tax saving will be clawed back.
Mileage
If you use your own car you can claim up to 45p per mile for business journeys and if you carry passengers – you can claim 5p per passenger per business mile for carrying fellow employees in a car or van on journeys that are also work journeys for them. Note that the payment can only be made if the journey is specifically for carrying passengers.
Salary
If you or your spouse or any family remember works in the company then you can pay them a salary. If you pay a salary of around £680 then there will be no Personal Tax or National Insurance. Plus, this reduces your Corporation Tax.
You can employ your Children on a part-time basis once they are 13 years old.
Pension contributions
Pension contributions are a great way of extracting cash from your business for your own future benefit. They are tax-deductible when they are paid. Therefore, it is advisable to pay into pension schemes prior to the end of a company’s financial year in order to maximise the deductions and accelerate the tax relief.
R&D Tax Relief
A company can claim R&D tax relief on qualifying research and development costs. The R&D tax relief scheme allows you to both deduct these costs from your trading income and claim up to an additional 130% (230% in total) as a corporation tax relief to be deducted from trading profits. Loss-making companies can use the corporation tax relief to increase their carried forward losses or claim a cash tax credit.
Research and Development can be anything that is considered innovation and overcomes an existing problem.
Don’t forget your employees
You can reward your staff with certain benefits that can attract a corporation tax deduction and not incur extra tax for them.
Staff Incentive Scheme
This isn’t necessarily a tax saving item but it is good to know you can pay employees up to £5,000 tax-free for a suggestion that once implemented provides your business with a financial benefit.
Health screening and medical check-ups
Expenses incurred in providing employees with a maximum of 1 health screening assessment and 1 medical check-up in any year.
‘Health screening assessment’ means an assessment to identify employees who might be at particular risk of ill-health.
‘Medical check-up’ means a physical examination of the employee by a health professional for (and only for) determining the employee’s state of health. This exemption does not cover medical treatment.
Nurseries and playschemes
Places in nurseries or playschemes on premises.
Childcare vouchers
Qualifying childcare vouchers up to the appropriate amount for a week are not taxed
Payments by towards additional household costs where your employees work at home
Payments made to your employees for their reasonable additional household costs if they work at home regularly, are exempt from tax. You may pay you up to £4 a week without the need to keep supporting evidence of the cost.
Mobile phones
One mobile phone can be provided and any line rental and calls with that phone paid. Money paid to your employee to use their own mobile phone is taxable.
Bicycles and cycling safety equipment
The benefit of a bicycle and/or cyclist’s safety equipment (or a voucher to obtain these) lent to your employee, provided that:
- such bicycles and equipment are available generally to all employees
- the main use of the bicycle is for journeys between home and work or between workplaces
Eye tests
These are exempt if they are required by health and safety legislation for employees who use a computer monitor or other screen.
Glasses or contact lenses
These are exempt if you have to provide them for monitor or screen work.
