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Reducing Corporation Tax the legitimate way

Over the last two blogs, we’ve looked at some pretty major ways of getting Corporation Tax breaks and how to reduce your tax liabilities.

And while they are definitely worth thinking about, we know some of you are more interested in the easy things you can do to reduce your Corporation Tax bill.

So, let’s take a look at a few simple but legitimate ways of getting Corporation Tax breaks. The last one, might surprise you!

Claim your small business expenses

This may sound obvious, but how many times have you forgotten to claim for a train ticket or not made a note of how many miles you drove to that meeting? Over the course of the year, these all start adding up, leaving you seriously out of pocket.

HMRC’s simple rule on business expenses is that anything claimed must be entirely for business use and broadly covers:

  • office costs, such as stationery or phone bills
  • travel costs, including petrol, parking, train or bus fares
  • food and drink – this only applies if you are away from your usual place of work, but includes attending business meetings and events
  • financial costs, e.g. bank charges or insurance premium costs
  • costs of your business premises, including business rates, heating and lighting,
  • advertising or marketing, e.g. social media campaigns, blog posts, new website

If you’re not 100% sure if it’s a claimable business expense, just ask. As accountants, we work regularly with clients in the Tring, Aylesbury and High Wycombe areas on Corporation Tax breaks, so understand all the ins and outs of small business expenses and often spot things that would otherwise be missed.

Use your annual staff party allowance

Believe it or not, you can spend up to £150 per head per tax year on annual functions such as a staff Christmas party or summer BBQ. The good news is, you don’t have to hold one event, it can be spread over several events, as long as it doesn’t exceed £150 including VAT per person. Costs can include food, drink, tickets to events, accommodation and taxi fares and also applies to any ‘partners’ invited along. Just make sure all events are open to all employees, otherwise it will be taxable.

You may also be interested in:

5 reasons why you should become your company’s landlord

Limited companies and Corporation Tax breaks: Part 1 – Building a pension pot

Did you know HMRC gives away a free gift for every self assessment tax return submitted on time?

Give Christmas gifts

And did you know that you can give yourself and your staff a Christmas gift without it being taxable? The only conditions are:

  • It must cost £50 or less
  • It can’t be cash or a voucher
  • It mustn’t be a reward for work or performance-based
  • It can’t be in the terms of their contract.

Time to go shopping!

Get HMRC to pay you interest

Yes, really! If you pay your Corporation Tax early, HMRC can pay you an interest rate, known as ‘Credit Interest’, which currently stands at 0.5%. The earliest HMRC will pay interest from is six months and 13 days after the start of your account period with the interest accumulated from the date you pay your Corporation Tax to the payment deadline.

If you’re super-organised and know that you won’t need that money for anything else, then this is definitely worth doing.

Need more help?

Over the years, we’ve successfully helped our clients around the Aylesbury, Tring and High Wycombe areas reduce their Corporation Tax by giving them this simple mantra to follow: less profit = less tax to pay. So, whatever you can do, legally, to reduce your profit is going to help reduce your final Corporation Tax bill, which can’t be a bad thing.

If you’re interested in learning more about effective Corporation Tax breaks for your limited company or are looking for new accountants in Aylesbury, why not give us a call.

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