Many local small business owners will be pleased to see the end of 2013 and the start of a new year as the recovery becomes a reality and the Bank of England predicts more positive growth forecasts for 2014.
With SMEs representing over 99 per cent of all private sector businesses, the Government has identified their importance in the British economic recovery, stating that its ‘vision is to make the UK the best place for businesses to start and thrive’. At the end of 2013, the Chancellor set out his plans for a ‘responsible recovery’ which include tax relief measures to support small and medium sized businesses and to encourage growth.
So, if you are the owner or director of an SME, you need to be aware of the various schemes and reliefs available to your business – or you could be missing out money that you are entitled to.
1. Tax relief on business investment capital
The Small Business: GREAT ambition guidance produced by the Department for Business Innovation and Skills identifies funding, including access to debt and equity finance, as a major factor inhibiting small business growth.
So, as a way of enabling companies to attract the investment that they need for growth, the government has offered ‘generous’ tax incentives through the Seed Enterprise Investment Scheme (SEIS). Designed to complement the existing Enterprise Investment Scheme which offers tax relief to investors in higher-risk small companies, SEIS gives 50 per cent tax relief, plus the deferral of any Capital Gains Tax, on an investment in small early-stage company shares (provided the investor is not employed by the company and has a shareholding less than 30 per cent).
If you are an investor (particularly if you have a capital gain to shelter), this provides a valuable sum – up to 78 per cent tax relief. Alternatively, if you are a businessman seeking investment, SEIS could act as a powerful incentive for someone to invest in your company.
2. Employment breaks
From 6th April 2014 companies will receive a £2000 credit against their NI costs through the Employment Allowance. Under the scheme, small businesses that employ 250 staff or less will be eligible for NIC reductions. The Treasury estimates that this will benefit around 450,000 businesses during the first 12 months of the scheme, with around one third of employers paying no NICs at all. In order to simplify the claims procedure, HMRC is working with payroll software providers to ensure that the allowance will be claimable by simply hitting a button in your payroll software.
Furthermore, with youth unemployment still causing concern, the government are also looking at ways of getting more young people into paid employment. There are incentives worth up to £2,275 available for employing an 18 – 24 year old who has been out of work and claiming benefits for at least 6 months. There is also a grant of up to £1,500 available for companies taking on up to a maximum of 10 apprentices for the first time.
3. Grants
Local Enterprise Partnerships are locally owned partnerships between local authorities and businesses. They work closely with a range of organisations, sharing good practice, trouble shooting and providing valuable help in terms of funding, grants and advice. Each local partnership has its own way of offering support, but these organisations can offer real and substantial assistance and funding and are well worth investigating. To find your local LEP, visit www.lepnetwork.org.uk.
4. Small Business Rates Relief
The Small Business Rates Relief has been extended for 12 months from April 2014, removing this tax liability for an estimated 360,000 SMEs. Under the scheme, if your business property has a rateable value of £6000 or less, you can get 100% rate relief; twice the usual rate of 50 per cent. The rate of relief then declines gradually to 0% if the rateable value is £12,000 or above.
5. Capital allowances on property
When purchasing a property, it is generally assumed that there is no tax relief on that cost. However a property will come with various inherent features which are eligible for capital allowances, for example air conditioning. For certain types of property, the allowances can be very significant, for example hotels, nurseries, etc. Multi-occupancy properties are also eligible. However, you need to act now as any allowances not claimed by 5th April 2014 will be forfeited. Prior to this date you can claim for any historical property purchases or renovations.
6. Research & development tax credits
Innovation is seen as an important part of the economic recovery, keeping British industry competitive within the European and global marketplace. Often neglected when margins are low, the higher rate of 225 per cent tax relief first implemented in 2011 is aimed at encouraging organisations to invest in research and development. R&D relief can be obtained on any qualifying expenditure – and it can be surprising what may qualify. Whilst expenses incurred when developing advances in technology or science often qualify, projects involving making things more efficient, cheaper or more environmentally friendly may also be eligible.
7. Patent Box
In addition to R&D tax credits, companies can claim relief through the Patent Box legislation. Under this initiative, a company can elect for any profits deriving from a patented product to be taxed at a lower rate of corporation tax. Ultimately, this could be as low as 10%, although the relief is being phased in over a number of years. This could apply where the company has acquired its own patent, or if it has the licence to sell a patented product. The relief can also apply to products which contain a patented component.
8. Business Premises Renovation Allowance
100 per cent tax relief is currently available for the conversion and renovation of empty business premises in specific ‘assisted areas’ as a means of regenerating areas of deprivation. To qualify, the property must have been empty for at least a year prior to any renovation works.
With tax legislation continually changing, it can be difficult to know exactly what you are entitled to. However, whilst the next 12 months offer brighter prospects for most SMEs, it is always advisable to be aware of any tax breaks on offer which could play a key role in funding your future growth and innovation.
About the author:
Carl Elsby is MD of chartered accountants Elsby & Co who specialise in working with SMEs, start-ups and family businesses across the Midlands. For more information, visit www.elsbyandco.co.uk, call 01604 678470 or email carl@elsbyandco.co.uk.
