Basic Corporation Tax reliefs

There are a significant number of reliefs that can reduce the amount of Corporation Tax your company needs to pay on profits made. Your company can also claim Capital Allowances for assets such as equipment, machinery and cars bought to use in your business.

The basic Corporation Tax reliefs include the following:

Research and Development tax reliefs – There are two schemes for claiming relief for R&D expenditure. The schemes are known as the Small or Medium-sized Enterprise (SME) Scheme for smaller companies and the Research and Development Expenditure Credit (RDEC) scheme for large companies. Large companies can currently claim a 12% RDEC also known as an ‘above the line tax credit’ for qualifying expenditure, whilst the SME scheme offers even more generous reliefs.

The Patent Box – This relief allows qualifying companies to apply a lower 10% Corporation Tax rate on profits arising from patent exploitation.

Creative industry tax reliefs (CITR) – This is the term for a collection of Corporation Tax reliefs that allow qualifying companies to claim a larger deduction, or in some circumstances claim a payable tax credit when calculating their taxable profits. The relief applies to qualify expenditure in the production of certain films, high-end television, animation, video games, children’s television, theatre, orchestra and museum & galleries exhibitions.

Relief on goodwill and relevant assets – Since 1 April 2019, the Corporation Tax relief restriction rules for certain acquisitions of goodwill and relevant assets changed. If relief is available, it is at a fixed rate of 6.5% a year on the lower of the cost of the relevant asset or 6 times the cost of any qualifying IP assets in the business purchased.

Loss relief – There are various Corporation Tax reliefs that may be available where your company or organisation makes trading, terminal, capital or property income losses. For example, trading losses may be used to claim relief from Corporation Tax by offsetting the loss against other gains or profits of the business in the same or previous accounting period.

Planning point

If you are concerned your company may not be receiving the appropriate amount of tax relief please call so that we can help you consider your options.