There are a number of different tax incentives to benefit growing businesses and reward those who make a success of them. You should aim to claim all the reliefs that you are legally allowed to use. These may include:
- Capital allowances. Businesses can claim a capital allowance against certain expenditure on cars, tools, machinery, equipment, research and development and other items.
- Enterprise investment scheme. This scheme provides tax relief to investors in certain types of small, unquoted companies.
- Patent box. From 1 April 2013 a reduced 10% rate of corporation tax will apply to profits attributed to patents.
- Controlled foreign companies relief. Relief is available for foreign taxes that the controlled foreign company has paid.
- Entrepreneur's relief. This is available to company directors and employees who hold 5% or more of the shares of the business for at least 12 months. If they sell the shares,the tax rate will be just 10% on the gain - limited to the first £5m of gain over their lifetime.
- Corporation tax. If you're a sole trader with a turnover of more than £50,000, it will probably be more tax-effective to operate as a limited company. Companies with profits of less than £300,000 pay corporation tax at the small profits rate of 20%; companies with greater profits pay the main rate of corporation tax, which is 24% in 2012/13, 23% in 2012/13 and 22% in 2013/14.