Business Finance: Stuart Wilkinson on how lack of growth is driving the tax agenda
WITH the party conferences now at an end there was one issue that dominated all political agendas; tax.
Whether it’s who should be paying more or paying less, the focus on tax, and tax compliance, is a common option used by governments to alleviate debt and will continue to dominate the business landscape.
Since HM Revenue and Customs (HMRC) was formed in 2005, there has been a raft of policy changes, from tougher penalties to improved internal information sharing. In today’s increasingly regulated environment, we are seeing growing pressure on firms to report the “right” financial numbers and group tax reporting is no exception to this. Making sure that you are aware of compliance rules coming down the line, and planning ahead to meet deadlines is vital.
Keeping well informed of tax reliefs and efficiencies that your business may qualify for could also help to keep valuable cash in the business. Innovation in turbulent times may be risky, but it is the fuel for economic growth, so it is important that the UK has an environment that supports innovation.
Two very important tax initiatives, the Patent Box coupled with the tax credit regime for research and development (R&D), will help local businesses to continue to develop new products, technologies and services which will benefit our economy.
From April, the Patent Box regime will give companies that hold patent interests the opportunity to significantly reduce their UK tax burden where qualifying income will eventually be taxed at 10% instead of the main rate of Corporation Tax, delivering cash tax savings and effective tax rate benefits.
In the same month, the R&D tax regime for large companies will change, making it more attractive to loss-making companies who will be able to secure cash repayments, as has been the case under the SME R&D scheme since its inception.
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If you have a large company and have not been making claims because of tax losses, then we believe it may be advantageous to put in claims now to set a precedent for subsequent claims and enable you to establish the potential benefit of the new “cash back” regime for large companies.
Remember, R&D tax relief can be awarded on equipment upgrades, improving existing products or processes, employing technical staff or developing ideas your competitors might want. Firms should carefully consider tax issues as part of the management of their intellectual property assets. For those international businesses, this should also include reviewing the transfer pricing arrangements.
: : Stuart Wilkinson is an associate tax partner at KPMG,