The government has a history of offering tax incentives to small businesses, but its generosity has increased in the wake of the economic slowdown. It sees small businesses as the engine that will drive future economic prosperity and is keen to help them succeed.
Understanding which tax incentives your business could benefit from could make a big difference to your profitability. The incentives available include:
- The regional employer National Insurance contributions (NICs) holiday for new businesses. New businesses that start up in designated areas of the UK (including, for example, the East and West Midlands, the South West and Northern Ireland) may qualify for a deduction of up to £5,000 from employer NICs for each of the first ten employees they take on.
- Business rate discounts. Businesses that start up in one of the 21 new enterprise zones (in locations such as East London, Manchester, and Birmingham), or relocate to one, will qualify for a 100% business rate discount for five years. New businesses not located in an enterprise zone may qualify for small business rate relief.
- Capital allowances. Businesses can claim a capital allowance (up to 100%, dependant on conditions) against certain expenditure on cars, tools, machinery, equipment, research and development and other items.
- Research and development (R&D) relief. This generous relief (up to 225%, dependant on conditions), which can only be claimed by businesses that pay corporation tax, may reduce your business's tax bill by more than your actual expenditure on allowable R&D costs.
- Enterprise investment scheme. This scheme provides tax relief to investors in certain types of small, unquoted companies.