small businesses uses tax benefits to watch their money grow

Tax Incentives for SMEs You Need to Know About

During the early development period, while establishing your Small to Medium Enterprise (or SME), every penny counts. You want to carve yourself an edge against competition in the industry as you fulfil a dream of owning a successful business. 

It is, therefore, an intelligent approach to consider all the ways in which you may reduce spends to both replenish and re-invest in your company. As the early bird catches the worm, the sooner you are aware and act on these opportunities, the better the foundations of your company to flourish. 

Stonehouse Accountants has collected some of the rather interesting possibilities available to SMEs that serve to reduce your tax bill!

Register For VAT ASAP

Though it is a law that a company with a turnover greater than £85,000 per anum must be VAT registered, this does not mean those not meeting this threshold cannot also apply. Any business can register for VAT.

On the surface, this suggestion seems counterproductive as a means of reducing your costs. But digging deeper, there are a wealth of benefits in willingly registering; 

  • You may backdate VAT reclaims up to four years. The lump-sum you would receive can then be used to improve and develop your company.
  • Being VAT registered enhances your reputation among customers and suppliers. Further, it provides the solid ground required when you eventually decide to grow your business.
  • There are additional helpful schemes that you may take advantage of once registered (such as The VAT Annual Accounting Scheme, and The Cash Accounting Scheme). 
  • Being registered means that you will charge an extra 20% on your outgoing invoices (with conditions). This will have a positive impact on your income in the short term.
  • Similarly, VAT must be added to your products and services. Then, you may reclaim the VAT of the products and services your company buys.  

Of course, each business has its own goals, and this one may not apply to yours. However, awareness is key. If you have any questions, Stonehouse can supply you with further information. 

Knees-Up, Tax Down

Though they don’t exactly shout about it, HMRC is more generous than you might believe. With an annual cost-per-head up to £150 (inclusive of VAT, and not a penny more!), your company events and staff shindigs qualify as tax-free.   

There are conditions. All employees must be invited, and the functions must serve as an entertainment event for staff. But this affords you a wonderful opportunity to throw a bit more cash into showing your team your appreciation with change. 

Cash For Clothes

On the most part, a uniform supplies immediate brand recognition or as an imperative means of safety (such as PPE and overalls). And it is almost certainly something your staff wears while working. 

If you supply a uniform, you should not necessarily have to pay any tax or National Insurance on those costs (Note- the conditions; clipping a name badge onto a regular T-shirt does not constitute as an example of uniform, however, a permanent logo does). However, records of costs and purchases of uniforms must be maintained. And once again, another benefit is that claims can be backdated to the last four tax years and received as a lump-sum. Moving forward, future claims will be presented in wages.

And to mark yourself as a fantastic boss, you should make your employees aware they too can claim a tax rebate for the cost of maintaining and replacing their uniforms (there is plenty of information online). 

Investment in Innovation

Does your company have a goal of researching and developing either in a scientific or technological context? Do you have less than 500 staff? And finally, is your turnover less than €100m? For ‘yes’, ‘yes’ and ‘definitely, yes’, you should contemplate applying for research and development (R&D) tax relief.  

There are many elements, from consumable items to software costs, that you can claim back on under this Government scheme. The purpose of R&D Tax Relief, where 2.4% of GDP is being invested, is to encourage a surge of growth in science and technology. 

Don’t be deterred by the impression that you must be a company that lives, breathes and eats science or tech to qualify. For instance, a construction business could claim given it is developing a new temporary approach to an issue or has identified a fresh sustainable technology.

The Government website owns paramount and extensive information on R&D Tax Relief, so if you feel you possess the criteria in any way we encourage you to take a look. 

The Government SEIS Your Worth

For those with between 4 and 48 months of trading, and with under £200,000 in assets, the Government’s Seed Enterprise Investment Scheme (SEIS) could be extremely beneficial in generating extra funds for your business. 

In a nutshell, the SEIS poses as indirect tax relief as an appealing incentive to individual investors when they purchase shares in your business. This is to encourage the financial backing of startups that investors may otherwise consider to be a risk. Such a rise in funds will allow your company the chance to expedite to its next milestone of expansion far sooner. 

Again, the Government website will elaborate with more detail on the necessary criteria and potential opportunities that unfold with this scheme. 

The Next Step

So, it seems that for SMEs who are interested in adding a little more fuel to their financial fire there are numerous approaches out there. We would advocate a deeper search if any of these prospects arouse your curiosity. 

However, if guided and informed assistance is prefered, Stonehouse Accountants are easily contactable here. We would revel in supporting you with any financial inquiries you may have!