Corporate Tax Reliefs

Corporation Tax or CT is something that many UK limited companies and certain kinds of organisations must pay. It’s based on the profits a company makes each year. The government has put certain corporate tax reliefs in place to help companies reduce their CT bill, so it’s always good to know what these are: Research & Development Tax Relief, Double Tax, Roll over and Held Over Relief, & Capital Allowances.

Research & Development tax relief

If you have projects running that are focused on coming up with new services, products or processes, or improving those that already exist which could lead to a scientific or technological breakthrough, then you could qualify for Research & Development tax relief.

Different types of Research & Development relief is available depending on how large your company is and whether the project has been subcontracted.

For example, SME Research & Development relief may be claimed if you’re a small-medium business with a staff of less than 500 and an annual turnover of over €100m or a balance sheet total of less than €86m.

Double tax

Double taxation relief is available to those individuals or companies who have income coming from a source in one country but are residing in another – in which case, the same income may be subjected to tax twice. Double tax relief alleviates this and in the UK, there are three options available – two of which are through a form of tax credit and one which is through a deduction from your business profits.

Generally, double tax relief is available if a UK company or resident is receiving interest or royalties from abroad and withholding tax has been subjected twice.

Rollover relief – Held Over

Is where a company or sole trader sell a trading asset and use the proceed to buy a replacement asset. so, the new asset base cost will be reduced by the gains proceed used in the new asset. this is usually for land and building.

If the procced is used to buy a depreciated assets such as plant and machinery then the relief is known as held over relief, and the base cost of the replaced asset will not change. therefore, in both cases when the replaced asset is sold then under the roller over the cost of the assets will be lower because of the gains from before. but under the held over the replaced asset will have itis original price and the gains from the old assets will be taxable now. the reason for this treatment is because the depreciated asset might fall in value over time where a building does not fall in value.

Rollover relief may be claimed by individuals who are in a trade as a sole trader or as part of a partnership. So, for example, if an individual is involved in two trades, the disposal and acquisition will not have to be a part of the same trade. Therefore, it’s possible to make a gain on an asset disposal within trade ‘A’ and purchase an asset used in trade ‘B’. For the purpose of rollover relief, both trades will be seen as a single trade.

Rollover relief may also be available to an individual who is operating a business involving furnished holiday lettings; occupying commercial woodlands and managing them on a commercial scale as well to make a profit; working in an office or doing vocational work, and providing an asset to his/her personal company what has been used in its day-to-day trade (a company where he has 5% or more voting rights).

In addition, rollover relief may also be claimed by an organisation selling an asset and wishing to reinvest the proceeds in the replacement of that asset.

the reason for this treatment is because the depreciated asset might fall in value over time where a building does not fall in value.

Substantial shareholding exemption

SSE applies to companies only and exempts specific gains which may otherwise be subjected to UK corporation tax after disposal of shares.

The key criteria for SSE to apply are related to:

  • If the company who is selling the shares are trading company
  • The shares held is at least 10%
  • The shares were held for 12 months out of the last 6 years.

If all the above are met, then the gains are exempt from tax.

If you need to know more about the different kinds of corporate tax reliefs available to you, please don’t hesitate to get in touch with our friendly tax advisers.

The Employment Allowance

Employment Allowance allows eligible employers to reduce their annual National Insurance liability by up to £5,000

Capital allowances

You can claim capital allowances when you buy assets that you use in your business, Such as:

  • equipment
  • machinery
  • business vehicles, for example vans, lorries or cars

These are known as ‘plant and machinery’.

You can deduct Capital allowances some or all of the value of the item from your profits before you pay tax.

Further HMRC guidance on Capital Allowances can be found Here

Our friendly and approachable Accountants in Slough, Adam Accountancy can advise you personally on the ones that apply to you.

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Published On: November 5th, 2022 / Total Views: 1417 / Daily Views: 1 /

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