Top Ten Tax Tips For SMEs
Of course all businesses want to make sure they are handling their tax effectively and benefiting from all of the reliefs and exemptions that are available to them. However, this is arguably even more important for SMEs, who tend to have smaller budgets and fewer resources to be able to handle everything in-house.
So take a look at these ten best tax tips for SMEs in particular:
Research and development relief
The government is making steps to encourage innovation in the UK. They allow businesses to claim up to 32.6 per cent of the costs they have spent on research and development. You simply need to be able to prove that you have taken a risk by improving a service/product or developing a new one.
Hire a chartered accountant
You should definitely consider hiring a chartered accountant. A lot of SMEs see this as an unnecessary expense. However, a good accountant will save you money. Plus, just think of the fines and penalties you could face if you do not handle your tax affairs properly.
Think about how to pay yourself
This is something you need to give a lot of consideration to. If you set up a limited company, it is usually a good idea to pay a small salary up to your personal allowance and the rest as dividends. However, it all depends on your unique situation, which is why it is best to consult a professional.
Patent Box Relief
This was introduced in 2013. Basically it affects companies that have patented products and are liable for corporation tax. You can opt for any profits coming from this product to be taxed at a lower rate of corporation tax, which could end up being as low as ten per cent.
Consider using the VAT flat rate
There are several different ways you can pay your VAT and via various accounting schemes. The VAT flat rate helps you to simplify things and in some cases it can actually leave you better off so is certainly worth looking into.
EIS and SEIS reliefs
The Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) have both been designed in order to help SMEs attract external investment. Equity investors will benefit from capital gains tax and income tax reliefs on qualifying companies.
Consider Income Thresholds
It may be sensible to transfer some of your income producing assets to your spouse in order to make the most of their lower taxable income.
HMRC Authorised Mileage Rates
It may be better to run your own vehicle and claim mileage using the authorised mileage rates that are in place from HMRC. This can sometimes also help you to avoid paying higher taxes on company cars if you have a limited company.
Salary Sacrifice Scheme
You may wish to consider arranging a salary sacrifice scheme for your employees. This can be used for a whole host of flexible benefits, including subsistence allowances, corporate gym membership and childcare.
100 Per Cent Capital Allowances
Last but not least in our list of tax tips, in some instances companies can benefit from 100 per cent allowances on capital equipment, as opposed to the standard rate of 18 per cent. This is something definitely worth looking into, as it can reduce your tax burden significantly.
As a small business I am trying to handle my taxes effectively; however, I don’t think I have taken all these factors into account. For example I had not considered using the VAT flat rate, which will allow me to simplify things, as well as salary sacrifice scheme. This has been very useful.