Treasure Trove of Tax Breaks & Reliefs Unclaimed!09 Jul 2018
The Government recently published a press release which highlighted how certain reliefs and tax breaks continue to be underutilised by taxpayers; whether this is due to a lack of awareness of the reliefs or hesitation and uncertainty over eligibility we cannot be certain, but as the Government is effectively giving away millions of pounds in cash which could help to improve an individual’s cash flow or a business become more profitable, we wanted to look into some of these well-known but not so well-used reliefs and tax breaks in greater detail:
Marriage Allowance was introduced in April 2015 and it allows a non-taxpaying spouse or civil partner to transfer up to £1,190 of their personal allowance (currently £11,850) to their partner thereby increasing their allowance and decreasing the amount of their income that is liable to tax, making it a valuable relief to take advantage of if eligible.
So far, 3 million couples have benefitted since the allowance’s introduction; however, a recent press release from the Government has shown that a further 1 million married or civil partnered couples are yet to claim the allowance which could boost their finances by up to £950 (£238 per year), as it is possible to back date the allowance to 2015.
When a trader buys a capital asset for long term use in their business (such as computers, alarm systems, air-con units and even kitchen units) capital allowances are broadly available to give tax relief which covers the cost of the depreciation of those assets.
The allowance is treated as an expense which is deductible when calculating the taxable profits of the business, so you can see how this could present a significant saving say for a new business acquiring new (or used) computers and vehicles to start their trade, or even an established business which might have undergone a conversion or refit of their offices for example.
However, capital allowances remain one of the most underused and oft misused reliefs, which may be due to sheer lack of awareness from business owners, but the blame must be shouldered equally by professional advisers, who may be missing or misidentifying eligible items. It will almost always be worthwhile having a specialist adviser brought in to detect the qualifying items, and protect the claims for the business which can often be significant, particularly with recent rule changes (applying to property) which could mean that the relief is lost forever on certain assets with no way to claw it back if the claim is not dealt with correctly.
R&D Tax Credits
Introduced to encourage British companies to invest in innovation, to ensure that the country continues to advance technologically and scientifically (which in turn increases the country’s global competitiveness, and attracts talent to the UK), R&D tax credits is a corporation tax relief which works by either reducing a company’s tax liability or creating a cash credit which is payable to the company.
Qualifying SMEs are able to claim a deduction which amounts to a staggering 130% of the costs of the qualifying R&D (which is in addition to the normal 100% deduction for business expenses). Larger companies (and their subcontractors) can claim a Research and Development Expenditure Credit for qualifying R&D, and this is a repayable tax credit of 12% which is accounted for when calculating the taxable profits of the business. Claims must be submitted within two years from the accounting period when the qualifying expenditure was incurred.
A wide variety of activities and industries (from construction to medicine and software development) are eligible for R&D Tax Credits, but the latest statistics show that the take up of the relief is still relatively low (total number of claims made last year was 26,255), meaning that many SMEs in particular are losing out on an especially generous offer.
Lack of awareness is perhaps the most recurring issue that affects the take up of each of these reliefs, however, if you or your clients are simply unsure about eligibility or would like to explore these reliefs, or any others, further then please contact us on the numbers shown below.