Nudge, Nudge, Wink, Wink.. UK Government Approved Tax Relief!
5th August 2015
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Do you want to know a really big Secret?!?!

I first published this post back in June, before I was a member of thebestof, I wrote it in the week following a speech by a former Chief Executive of The Law Society, here in the UK, where he told gathered members of the CTA (Chartered Tax Association) that there was a disconnect between the profession and public opinion on Tax Avoidance, I felt it was something worth blogging about then and I felt it was worth sharing with you here, i have made a few amendments to the original.

The damned cheek of it!

There has been outcry from the profession at the somewhat hypocritical statements in the speech, particularly given the fact that artificial tax avoidance schemes that have been created are never marketed without the approval of a Tax Counsel who proffers to argue that such a loophole exists and can be reasonably exploited by individuals or companies.

Whilst there is significant public concern about tax evasion and aggressive tax avoidance, there are genuine government approved schemes that are targeted at both individuals and companies designed to make this United Kingdom “the innovation nation”. 

For Individuals

There are tax reliefs such as Entrepreneurs Relief, Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (Seed EIS/SEIS). Entrepreneurs Relief is available to "entrepreneurs" when they exit a business that they have a significant shareholding in, where they have been involved in active management, it can be used to reduce your Capital Gains Tax when you dispose of your shares. EIS and SEIS are available to individuals who wish to invest in a pre-approved company who has applied to be eligible for the funding. These investments are often high risk as the companies seeking investment are often startups or expanding SMEs. You should seek proper advice when considering investments in to these schemes.

In fact if you wanted an example of an EIS approved business, you might want to have a read of the articles published by Mina O'Brien at Ditzy Media about Jack Barlow, the young Sussex-based Racing Driver. Jack and the team that support him have created a Limited company that is EIS approved and are using it as a vehicle to attract investment allowing him to pursue his motorsport career. If you have an interest in helping young talent progress and an interest in motor racing, you might do well to get in touch.

For Companies

The relief is very different, incredibly rewarding and yet, it is significantly underclaimed, because even though the legislation has been around for 15 years, the myths that surrounding it have prevented UK SME companies from claiming many £m worth of tax relief and tax credits.

I am, if you have never heard about it, referring to Research and Development Tax Relief. Legislated for by the New Labour government initially for Small- and Medium-sized Entities (Companies) in 2000 as the SME Scheme, it was joined by its younger, but bigger brother in 2002, the Large Company Scheme, which will in turn have been usurped by the introduction of RDEC which will be the only way Large Companies can claim this Tax Relief from April 2016. The SME Scheme has been significantly improved since its initial inception and now offers profitable companies the opportunity to obtain 25% of their eligible spend in additional tax relief, and for a loss making company they have the opportunity to sacrifice their tax loss for a tax credit equivalent to 33.35% of their initial spend, in some circumstances.

Essentially these “government-approved” tax reliefs allow Limited companies to legitimately reduce their corporation tax bill, if they can demonstrate that they have been engaged in Research and Development, that has been “trying to advance global knowledge through the resolution of scientific or technological uncertainty”.

It may sound complicated, but with proper guidance and a thorough understanding of the legislation, a company’s New Product Devlopment (NPD) or product or process improvement could be eligible for the tax relief and could save a company many £000’s in tax.

Now that you have heard the secret, pass it on to your friends, business contacts and colleagues. I’d like to hear some Chinese Whispers please! Call us with your questions on 01323 458129

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About the Author

SB

Member since: 25th September 2014

Simon Bulteel is the owner and Managing Director of Cooden Tax Consulting, a division of Cooden Consulting Limited. A niche tax consultancy specialising in Research and Development Tax Relief, Patent Box...

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