Corporation Tax is paid by limited companies on their profits. If your business is subject to Corporation Tax, then tax planning and computations can be very complex and time consuming. As a company director, you will need to keep extremely detailed financial records and have established processes for recording information for tax purposes. The current rate of Corporation Tax is particularly low; comparable to the rates for Personal Income Tax which can bring significant tax planning opportunities. If you plan wisely and consult a specialist in tax, you may be able to make significant savings.

What is Corporation Tax?

In its simplest form, Corporation Tax is charged on any profit made by a company. This not only includes money generated from daily business operations, but it can also include any profits made from assets which may have been sold. Such as equipment or even a section of the business, these types of profits are usually referred to as chargeable gains. Very similar to the self-assessment tax return, Corporation Tax is charged over a 12 month accounting period, usually your financial year. The rules for this tax clearly define what allowances and reliefs can be claimed from business income when working out the total taxable profit.

Tax Reliefs and Allowances

Understanding and taking advantage of tax reliefs and allowances can help businesses reduce their Corporation Tax liability. This section will provide information on various tax reliefs and allowances that may be available to your business.

a. Capital Allowances Capital allowances can be claimed on certain capital expenditures, such as machinery, equipment, and commercial vehicles, used in the course of your business. By claiming capital allowances, you can deduct a portion of the cost of these assets from your taxable profits, thus reducing your Corporation Tax liability. There are different types of capital allowances available, including the Annual Investment Allowance, First Year Allowances, and Writing Down Allowances.

b. Research and Development (R&D) Tax Credits R&D tax credits are available for companies undertaking qualifying research and development activities. These tax credits can either reduce your Corporation Tax liability or, in some cases, provide a cash payment from HMRC. Small and medium-sized enterprises (SMEs) may be eligible for the more generous SME R&D tax credit scheme, while larger companies can claim under the Research and Development Expenditure Credit (RDEC) scheme.

c. Patent Box Regime The Patent Box regime allows companies to apply a lower Corporation Tax rate on profits derived from patented inventions and certain other intellectual property rights. By electing into the Patent Box, you may be able to reduce the effective Corporation Tax rate on these profits to as low as 10%.

d. Creative Industry Tax Reliefs Creative industry tax reliefs are available for companies involved in film production, animation, video games, theatre, orchestra, and other creative sectors. These reliefs allow qualifying companies to claim an additional deduction for certain production expenditures, which can reduce their Corporation Tax liability.

To fully benefit from these tax reliefs and allowances, it is crucial to understand the eligibility criteria and claim processes. Engaging a tax specialist can help you identify the reliefs and allowances applicable to your business, ensuring that you are taking advantage of all available tax-saving opportunities.

Group Tax Planning

Group tax planning involves identifying tax-saving opportunities and strategies for groups of companies, which can include parent companies and their subsidiaries. This section will discuss some key aspects of group tax planning, including group relief, group capital gains, and the implications of anti-avoidance rules.

a. Group Relief allows companies within a group to surrender losses or other specified reliefs to other group members, effectively offsetting the profits of one company with the losses of another. By using group relief, you can minimise the overall Corporation Tax liability of the group. It is essential to understand the rules and conditions surrounding group relief claims, as well as any limitations and anti-avoidance measures that may apply.

b. Group Capital Gains When companies within a group dispose of assets, it may result in capital gains or losses. Group capital gains rules allow for the transfer of assets between group members without immediate tax implications in certain circumstances. This can provide tax planning opportunities, such as utilising losses within the group to offset capital gains or deferring gains until a more tax-efficient time. Careful planning and expert advice are necessary to navigate these complex rules and ensure compliance with anti-avoidance measures.

c. Anti-Avoidance Rules HMRC has introduced several anti-avoidance rules to prevent the artificial manipulation of profits and losses within a group of companies. These rules can impact the availability of group relief and group capital gains planning opportunities. For example, the ‘loss-buying’ rules restrict the use of purchased losses, and the ‘controlled foreign companies’ (CFC) rules can affect the taxation of profits earned by foreign subsidiaries. It is essential to understand and consider these rules when planning tax strategies for your group of companies.

Effective group tax planning requires a deep understanding of the tax rules and regulations that apply to groups of companies. Engaging a tax specialist with experience in group tax planning can help you identify tax-saving opportunities and ensure that your strategies are compliant with anti-avoidance rules.

Why Use a Tax Advisor?

Your Corporation Tax requirements will vary as to the nature of your business and how you operate. Additionally it will become very complicated if you carry out business internationally. This is why it is so important to employ a tax specialist who can take care of your tax affairs and ensure that they are managed effectively. They can also offer you advice on tax planning strategies and methods to save tax, and help you operate your business more tax efficiently.

We can help you with accounting advice and tax planning to become more financially efficient. This involves reviewing multiple aspects of your business so that you can operate cost-effectively, reduce your tax liabilities and make sure you claim every tax relief that you are entitled to.

Who We Work With

We work with businesses at all stages of operation; from start-up enterprises with straightforward tax affairs, through to large international organisations where the tax is more complicated. We are also able to provide support for investment acquisitions and disposals, as well as succession planning.

Our team will work with you or your in-house accountant to establish clear procedures for compliance, support and planning within your specific business sector. What’s more, we have extensive experience with HMRC, so we can maintain effective communication channels with them throughout the process.

Corporation Tax Services

We provide high-quality tax services to businesses and individuals. Our Corporation Tax service includes:

• Successful strategies and established processes to manage tax data and your financial reporting requirements relating to tax
• Meticulous preparation of your Corporation Tax returns using the latest software which meets the ever-changing demands and online submission requirements
• Expert advice provided on a whole variety of issues such as tax credits for research and development purposes
• Communication with the HMRC including query resolution and any tax enquiries

Regardless of your Corporation Tax requirements, our dedicated team can work with you, nationally or internationally to address all of your tax processing and submission requirements. We structure our processes around the needs of the businesses we work with. We use the latest technologies and software so that we can prepare an accurate and complete tax return which leaves you more time to spend running your business.

International Tax

International tax rules are a complex mystery to many business owners. We are experts in this area and can provide support for:

• Businesses in the UK who are thinking of branching out or setting up business overseas
• Understanding the local tax rules and how these relate to the taxes that you need to pay in the UK
• Up to date advice and information provided on UK taxation for foreign businesses

If you are looking to explore new markets, it is really important to explore and understand the issues relating to tax, this is where we can help. We are able to devise a strategy unique to your business which will:

• Address all of your requirements and identify ways in which your overall tax liability can be minimised
• Ensure that you fully comply with all of the tax legislation and regulations overseas, and in the UK
• Understand the allowances that you can claim for and convey this information to you
• Devise a comprehensive International tax strategy for your business

The tax advice that we provide has been specially designed to suit both UK and international businesses. We will conduct an initial consultation to find out about your business and understand your goals for the future, particularly if you are considering overseas expansion.

Why Work With Us?

Our team always provides practical and straightforward advice. We will explain everything to you clearly, so that you fully understand and are able to make an informed decision on which of our tax services are most suitable for you, and your business.

Our tax experience is second to none across a diverse range of sectors, and we understand that the financial and tax requirements of every business are different. We don’t have a one strategy fits all approach; we take a great deal of pride and care in working with each business to develop a completely unique Corporation Tax strategy.

Furthermore, we can offer advice on tax planning and how to transform your financial processes. Ensuring that you are collecting and processing the correct paperwork, while ensuring that you are not spending more time than you need to be on complex tax affairs.

We can help

At Mercian Accountants, our experienced team of tax professionals is dedicated to providing exceptional tax advice and support tailored to your business needs. Whether you’re a small start-up or a large international organisation, we can guide you through the complexities of Corporation Tax, ensuring compliance while identifying opportunities for tax savings and efficiencies.

Our comprehensive range of services includes tax planning, international tax support, VAT and indirect taxes, Making Tax Digital, tax dispute resolution, and much more. Our bespoke approach ensures that we work closely with you to develop and implement tax strategies that align with your unique business goals.

Why choose Mercian Accountants?

1. Expertise: Our team has extensive experience in various tax matters across a diverse range of sectors, ensuring that you receive practical and informed advice.
2. Tailored Approach: We understand that every business is different, and we take pride in developing unique tax strategies that cater to your specific needs.
3. Clear Communication: We will explain complex tax issues in a straightforward and accessible manner, ensuring that you fully understand your tax obligations and the available options.
4. Proactive Support: We stay up to date with the latest changes in tax legislation and regulations, ensuring that you remain compliant and informed of any developments that may impact your business.
5. Technology-driven: We utilise the latest technologies and software to provide efficient and accurate tax preparation and submission services, giving you more time to focus on running your business.

Ready to simplify your tax affairs and discover new tax-saving opportunities? Contact Mercian Accountants today for a no-obligation consultation and find out how our expert tax services can help you achieve your business goals.

Get in touch with our tax specialists at Mercian Accountants by calling 01743 562430, emailing hello@mercianaccountants.co.uk, or visiting our contact page to schedule your free initial consultation. Let us help you navigate the complexities of Corporation Tax and unlock your business’s full potential.