What changes will a new government bring to the tax landscape for SMEs? Will a renewed focus on tax reliefs in areas such as R&D be a welcome boost?
The Conservative Party’s reduced majority following the general election has created a degree of certainty for businesses, since it means the government no longer has the ability to push radical tax change through the House of Commons.
This paralysis is not an excuse for complacency. In fact, it has never been so important to review your tax planning because unexpected events could lead to an unwanted early election resulting in a more hostile environment towards wealth creation.
Currently they are still some valuable tax reliefs and allowances available, but the key point is using them.
Support for innovation
A key relief is R&D tax credits which applies to companies working to resolve technological or scientific uncertainties. This attractive and generous relief covers many different sectors.
As historically this relief has been restricted by the need to gain EU permission to extend it we could see an early “Brexit dividend “as the Government substantially increases it on our EU exit.
This together with the lowest corporate tax rates in the G20 will allow the government to transform the UK into a world-leading innovation hub.
The answer is for owners to simply pick up the phone, says Haines Watts R&D specialist Chris Beale. “When my clients keep in regular contact about exciting new projects they are working on, we can help,” he says. “But we need to know this information as they start work as this will make it easier to take advantage of all available tax reliefs including R&D, patent box and capital allowances.”
Remuneration planning remains a complex area as once your income exceeds £100,000 your personal allowances are clawed back and you face a 60% effective rate of tax on income up to £123,000. Depending upon your individual, and family, circumstances a mixture of salaries, dividends and pensions can be structured in such a way as to maximise after tax income at the minimum tax cost to the individual or family.
Therefore given how easy it is for business owners to make incorrect assumptions about tax reliefs it’s vitally important to carefully plan to ensure that you are aware of the rules and how they affect your personal circumstances.