Our Tax Director, Sara Crowther, provides a range of specialist Corporate Tax Services to our clients and some of these are explained below:
Research and development (R&D) tax relief
Research and development (R&D) tax relief is a government subsidy administered through the corporation tax self-assessment system.The relief rewards companies that carry out innovative activities, to technically improve products, processes, devices, materials and/or services. In order to claim R&D tax relief a company must be carrying on a project that:
- seeks to achieve an appreciable improvement in the field in scientific or technological terms, and
- requires the resolution of scientific or technological uncertainty.
There is a common misconception that the relief only applies to high-technology companies, but in fact, the relief is equally applicable to companies that operate in engineering, manufacturing, software and agricultural industries, and we have experience of working with companies across these sectors.For companies that are making profits, the relief can reduce their corporation tax bill and represents a subsidy of approximately 25p per £1 spent on R&D.For some small or medium sized companies that make losses, the relief allows them to cash in their losses for a cash sum, representing a subsidy of as much as 32p per £1 spent on R&D.In recent years H M Revenue and Customs have been enhancing the tax relief available to innovative companies and are encouraging companies that have not claimed before to do so.
The Patent Box regime reduces the rate of company tax on profits from patents and sales of patented products to just 10%.The Patent Box regime is very generous, applying the 10% tax rate to worldwide profits arising from the exploitation of patents which have been granted by either the UK Intellectual Property Office or the European Patent Office. For this purpose, the definition of profits is very broad including sales of patented products or products incorporating patented items as well as licence fees or royalties.In order to claim, the company must meet the development condition i.e. they must have created or made a significant contribution to the innovation.The patent box regime is a very generous relief and gives a further commercial justification for the costs of obtaining patents. Clients often tell me that they don’t apply for them because they could not afford to defend them. However, they are worth applying for just because of the tax benefits!
Capital allowances are available on plant and machinery including:
- Vans and cars
- Equipment such as tools and computers
- Other items used (wholly or partly) in your business
Some businesses fail to maximise the capital allowances they can claim and therefore pay too much tax. One of the main areas where they under claim relates to the capital allowances available on buildings. A building contains main items that are eligible for capital allowances including:
- Electrical and lighting systems;
- Heating and cold water systems;
- Air conditioning;
- Kitchens; and
Crowthers are experienced at assisting companies to identify the expenditure that qualifies for tax relief in relation to buildings. In particular we specialise in:
- Identifying items eligible for capital allowances in relation to the development of a new building or the refurbishment of an existing building;
- Advising on the capital allowance position during the sale or purchase of an existing building. In April 2012 some complicated rules were introduced that mean if you do not take the necessary steps relating to capital allowances during the transaction, the tax relief available on the building will be lost forever, potentially devaluing your asset.
Planning for the future
Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS)
SEIS is aimed at helping small early-stage companies raise equity finance by offering the following tax reliefs to investors subscribing for shares:
- 50% income tax relief (capped at £100,000);
- Exemption from CGT if the shares are held for 3 years;
- CGT relief – a gain on another asset can be relieved (capped at £100,000 for 2012/13 and £50,000 for 2013/14).
EIS is designed to assist smaller high-risk trading companies to raise finance by offering the following tax reliefs to investors subscribing for shares:
- 30% income tax relief;
- Exemption from CGT if the shares are held for 3 years;
- CGT deferral relief – a gain on another asset can be deferred.
In order to qualify for the relief both the investor and the company must meet certain criteria. We have experience of assisting companies to obtain advance assurance from H M Revenue and Customs that they meet the company requirements, to offer potential investors certainty that they will obtain the above tax reliefs. We also advise investors as to how to structure the investment to maximise the relief and complete all necessary paperwork to secure the tax relief for the investors.
Corporate and group restructuring
We have assisted many companies to insert or improve their group structure to align it with their commercial intentions. We have experience in:
- Inserting new holding companies;
- Splitting the trading activities into separate companies in preparation for a future sale of one trade;
- Separating intellectual property or other intangible assets into a separate company; and
- Carrying out de-merger transactions where two shareholders are no longer able to work together.
Our aim is always to implement a structure that is both commercial and tax efficient.
Inheritance tax planning and succession planning
We are experienced in assisting individuals to mitigate their potential inheritance tax liabilities, without exposure to capital gains tax, income tax and stamp duty. We seek to balance our tax planning with your personal motivations in such a way as to enable you to maintain control over your assets and ensure you receive the income you need for the future.