DON’T let tax be a problem this year. Stay ahead of developments and make sure you take advantage of ways to legitimately reduce your company’s liability to tax.

Here are some of the allowances and planning tips directors and company owners should know about this year.

Research and development

The R&D rules offer tax opportunities for SMEs. R&D expenditure carries a substantial 225% deduction against profits for SMEs. The rate of relief is 130% for large companies. An additional tax credit system allows non-profit making companies to relieve the R&D expenditure or the trading loss - whichever is the lower - in exchange for a cash sum. There is a great deal of flexibility regarding what can be claimed for. Ask for our advice if you are incurring R&D costs.

Pension contributions

Pension contributions offer tax savings, including reducing national insurance contributions for both employee and employer. Some employees and employers agree to a ‘salary sacrifice’, whereby a portion of salary is exchanged for a pension contribution by the employer. However, where the employer and employee’s annual contributions exceed £40,000, the employee may be subject to an annual allowance tax charge. An individual may carry forward any of the annual allowance that they have not used in the previous three years.

Cars

The tax treatment of cars in a company is complex due to recent changes that have affected both the capital allowances that the company can claim on the purchase of a car and the benefit in kind that employees will pay tax on (and the company will pay NICS on). The changes were designed in part to encourage both companies and employees to choose more fuel-efficient vehicles, by linking both taxes to the official emissions rating of the car. Choosing a fuel-efficient car can benefit both the employee and the business, with the lowest emission cars attracting 100% tax relief on purchase and carrying a benefit in kind as low as 0%. Conditions apply so please ask for further advice.