Business tax credits are government incentives designed to support companies of all sizes while encouraging particular behaviours, strategies or investments.

They take various forms, including exemptions, allowances, and reliefs, but a common element is they reduce a company’s tax liability.

Business tax credits provide financial incentives for specific activities or investments deemed desirable by the government.

But what are tax credits for business and how do you qualify for them?

What is classed as a business tax credit?

There are a range of business tax credits available to UK businesses.

These include:

Research & Development (R&D) tax credits

R&D tax credits are aimed at encouraging innovation and investment in research by providing tax relief to companies that invest in qualifying activities.

Eligible companies can claim either a reduction in their overall Corporation Tax liability or a cash payment, depending on their size and profitability.

Capital Allowances

Capital allowances allow businesses to deduct the cost of certain assets, such as equipment, machinery, and vehicles from their taxable profits.

This reduces the amount of tax a company has to pay, while providing an incentive for investment in capital assets.

This can include equipment, machinery, and vehicles.

There are different kinds of capital allowances, and they can be complex to understand.

For that reason, it’s important to receive expert financial advice to ensure you are claiming the allowances to which your business is entitled.

Enhanced Capital Allowances (ECAS)

ECAs provide additional tax relief for investments in technologies and equipment that have been deemed to be environment-friendly.

This can include energy-saving equipment or low-emissions vehicles, with businesses sometimes being able to deduct the full cost of the investment from their taxable profits during the year of purchase.

Employment Allowance

Employment Allowance is a relief that reduces the Class 1 National Insurance Contributions (NICs) employers need to pay.

This helps to reduce the cost of employing staff and encourages job creation.

Small Business Rate Relief

Small business rate relief can reduce the amount of business rate companies have to pay on their premises. This can provide significant savings, helping to support growth and sustainability.

Creative Sector Tax Reliefs

Certain creative industries, such as film, television, video games, and theatre, may be eligible for tax reliefs aimed at promoting the vibrant UK cultural sector.

Can you receive business tax credits for energy efficiency?

Businesses in the UK can receive tax credits and incentives for investing in energy efficiency measures and adopting sustainable practices.

Several schemes are available alongside Enhanced Capital Allowances, including the Energy Saving Opportunity Scheme (ESOS) and the Climate Change Levy Exemption

Expert tax and financial management services for small businesses from DAAFL

Understanding business tax credits can be complex, so it’s essential to receive expert advice to ensure you’re accessing all of the allowances to which your business is entitled

At DAAFL, our expert team can provide comprehensive tax advice and planning services for small businesses.

Our specialist small business tax services can reduce your tax burden through sensible business tax planning taking advantage of any allowances and reliefs while ensuring you remain compliant.

Contact us for further advice on effectively managing your business tax affairs.