Research & Development ("R&D") relief is available to companies that engage in projects that seek an advance in science or technology. Where available, the relief provides assistance in the form of a reduced tax bill or a repayable tax credit, calculated by reference to the level of expenditure incurred by the company on research and development activities. Carry on reading for some of the latest developments in the world of R&D relief. Not sure what R&D Relief is? You can read more about R&D relief and when it applies by visiting the Research & Development page of our website. PAYE & NICs Cap As announced in the 2018 Budget, for accounting periods beginning on or after 1 April 2020 the R&D...

In this two part series, we’ll be looking at the tax advantages of company share schemes for directors looking to reward, retain, and incentivise their staff. In Part 1 we looked at Company Share Option Plans (“CSOPs”) and Enterprise Management Incentive schemes (“EMIs”) which are more common with SMEs. In this part, we’ll be looking at Share Incentive Plans (“SIPs”) and Save As You Earn schemes (“SAYEs”) which can often be more appropriate for larger companies. As we discussed in Part 1, providing employees with shares directly can come with significant tax and National Insurance Contribution ("NIC") costs as well as cash flow problems for the employees receiving shares. Tax Advantaged Share Schemes for Empl...

In welcome news for those setting up EMI schemes, HMRC has announced that the window for agreeing EMI share valuations has been extended from 60 to 90 days. The Announcement HMRC made the announcement through the Employment Related Securities Bulletin 32 (June 2019). You can find the full bulletin here. What are EMIs? As covered in our previous blog, EMIs are a type of tax advantaged share scheme that allows companies to reward, retain, and incentivise select staff. EMI schemes operate by allowing companies to give select staff the opportunity to buy shares in the company at a price set when the share option is agreed. The Importance of Correct Valuations If EMI share options are priced at the market price when the o...

Certain taxpayer expenditure can qualify for tax relief, and these amounts are known as deductible payments. The payments are deducted from income when calculating taxable income, effectively saving tax at a taxpayer’s marginal rate. For example, if a taxpayer pays tax at a marginal rate of 40%, they will  have saved 40p for every £1 of the payment they pay in the tax year. Interest paid on qualifying loans is a deductible payment, however there is a cap on the amount that may be relieved each tax year.  The total amount which can be deducted is the greater of £50,000 or 25% of adjusted total income (being total income less payroll giving and gross pension contributions paid). Qualifying Interest Where a loan is a qualify...

Capital Allowances are a form of tax relief that can be claimed by traders when they incur expenditure on “plant and machinery”. They can be deducted from the tax adjusted profit for the accounting period, thereby reducing the taxable trading profit. However, the definition of what constitutes “plant and machinery” is a contentious issue and one that is discussed in a significant amount of case law. The case law, along with the Capital Allowances Act 2001 and HMRC practice, suggests that an asset qualifies as “plant” if it has an expected life of two years or more and has a clear function in enabling the activities of the business to take place. Buildings and a number of other structures are specifically excluded from t...

Changes introduced by the Finance Act 2019 (FA-2019) address inconsistencies between the tax treatment of tangible fixed assets (e.g. cars, vans, machinery, buildings) and intangible fixed assets (e.g. goodwill, intellectual property). The new provisions bring the intangible fixed assets rules more in line with those applying to tangible fixed assets. Degrouping Charge A degrouping charge may apply where a company (Co A) acquires assets from another group company (Co B) on a no gain/no loss basis, and Co A leaves the group within 6 years of acquiring the asset. The effect of a degrouping change is that Co A is deemed to have disposed of and reacquired the asset at market value immediately after the asset was acquired, thereby crea...

The provision of company shares can be a valuable tool in incentivising key members of staff to remain with the company long term and actively grow the company’s business and increase profits. HMRC has several approved employee share schemes, each with their own tax advantages for the employee and employer/shareholders. However, certain conditions must be met by the employer/employee in order for these schemes to qualify and therefore they are not always commercially viable. Growth shares are a practical option, especially where the company shares already have significant intrinsic value. What are Growth Shares? Suppose that a company wishes to incentivise one of its managers to stay with the business and continue to contribut...

If your business imports and/or exports goods with the EU, you may be struggling with the uncertainty around the UK's withdrawal from the EU. In December 2018, HMRC published a letter for businesses that trade with the EU and steps that should be taken to prepare for no deal. This blog will help you to understand these steps and the actions that you should take. Firstly, in the event of no deal, you will be responsible for making customs declarations for your UK-EU trade. In order to ensure that you are ready for this, you should: Register for a UK Economic Operator Registration and Identification (EORI) number. You can do this at gov.uk/hmrc/get-eori. Register with HMRC’s new Transitional Simplified Procedures (TSP) for cus...

Entrepreneur’s relief  ("ER") is a valuable relief from Capital Gains Tax ("CGT") which, when available, restricts the tax rate to a flat 10% on up to £10 million worth of lifetime gains. The 2018 Budget announced changes to the conditions for obtaining ER, and in light of the new rules it may be worthwhile for taxpayers to dispose of relevant assets before 6 April 2019. Minimum Qualifying Period ER applies to disposals of: shares in a trading company; (the whole or part of) a business; assets in association with the sale of a business; assets from a solvent company that has ceased trading. For disposals involving shares, the shareholder would need to work for the company and hold at least 5% of the ordinary s...

In our two part series, we'll be looking at the tax advantages of company share option schemes for directors looking to reward, retain, and incentivise their staff. In brief, a share option gives a recipient the right (but not the obligation) to acquire shares in a company in the future. This can give employees the chance to share in the growth of the company, providing strong incentives, whilst being very cost-efficient from the company’s perspective as well. In this part, we'll focus on two of the more common schemes used by SMEs: Company Share Option Plans (“CSOPs”) and Enterprise Management Incentive schemes (“EMIs”). The second part will examine Share Incentive Plans ("SIPs") and Save As You Earn schemes ("SAYEs"). ...