UK organizations should conduct intelligent tax planning and know how companies can pay the appropriate amount of tax they owe. Companies can at the same time follow these easy guidelines to decrease corporate tax.
1. Claim all costs
Try to claim all the costs you make for business. In the company, even £1 important. Record the little cost your customers are paying for their job to assist lower your corporate tax and therefore minimize stresses. Small expenses such as £3 bus tickets or a £2 paper pad might be a hasse, but these items will be added up over the year and paid up later on in the company tax.
2. Mobile phone company
With the present working environment, it essentially took precedence to remain linked from home. Companies contemplate providing their staff with corporate mobile phones for calling consumers and customers. But the costs of your customers’ mobile devices are tax deduction, which can contribute to reducing corporate income tax. There are several requirements that must be met if a mobile phone is to be made available to the child without benefit (BIK).
- First of all, the telephone must be owned by the company and not by the employee. This implies, when you leave the organization, you must return to the firm.
- Only one functional phone is available for each employee. The director of the company does not matter what the employee is.
- Unable to trade telephone for greater wages.
Finally, any contract for a mobile device employee should be entered into under the name of the company, payment being made by the firm. It will thus be a good idea to ensure that all workers realize that the contractual limit for phone use must not be exceeded.
3. Salary Director
Business managers earn salary and dividends payments. A paycheck may be an effective means of reducing corporation tax. As a tax-deductible corporate expenditure to workers, the HMRC recognizes compensation. Dividends should also be paid exclusively from the company’s income and not from tax deductible.
4. Home benefits work
HMRC enables companies to claim certain costs in order to minimize corporation tax for utilizing their personal area as a tax deduction expenditure.
For work from home allowances there are two options:
- Claim for a flat rate of £6 per week (for the year 2020/21 and £208 for the preceding year, a maximum of £312 per year).
- Rent your limited firm a room at your customers’ personal residence.
On the personal tax returns of your customers your customers must record their income as rent from the limited business.
5. R&D Relief Tax Claim
We trust you will not lack the tax reduction for the developments made by your customers.
If your customers produce new or improving processes, product or software, then for every £100 000 spent on innovation it is probable that you may save your corporate tax by around £25,000. Tax savings for research and development benefits may also be available when you have paid for research equipment.
If the firm is qualified to claim R&D tax credits, it will not only cut the corporation tax bill but also part of it will be returned in the form of tax credits, for example, for certain typical tax-deductible business costs such as wages, supplies, software, and so on. It depends entirely on the size of the firm and on the profit or loss of the company.
6. Travel Kilometer Claim
You can claim your miles to decrease but to a limit your company tax. You can claim your miles. You can encourage your customers to operate their personal automobiles for business travel and can reimburse them a firm set amount of mileage costs if their customers are a small, limited business with few workers. The use of a pool automobile, a business car or a corporate van can also provide the firm some tax savings through capital allowances, but may incur additional BIK taxes to both employees and companies.
If workers or administrators are using their own private vehicles for commercial purposes, a set fee of 45p/mile is up to 10,000 miles per year. The fixed prices fall to 25 pp per mile after that limit.
Note: Mileage can be claimed only for business purposes and mileage cannot be claimed for daily travel to your place of work.
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