Your Business With James Caan 2017 - 65
help you prepare a business plan too,
and obtain ﬁnance - vital steps when
you're getting started.
From keeping records to advice on
the best structure for your business,
accountants bring invaluable services
and expertise to your start-up. They
can also deal with tasks such as payroll
and VAT compliance, ensuring your
business stays on top of its statutory
responsibilities, saving you precious
time and helping your business avoid
Here's the lowdown on what an
accountant can do for your business.
There are several options to choose
from when setting up your business
and an accountant can help you decide
which of them is best for you:
SOLE TRADER As the name implies,
this refers to one person who is
in business on their own. A sole
trader is basically self-employed
with no special legal structure.
PARTNERSHIP This is when two or
more people are in business together
and share the proﬁts or losses.
LIMITED COMPANY These have
separate legal identities from their
owners (shareholders), the directors
and other employees.
LIMITED LIABILITY PARTNERSHIP
(LLP) A corporate entity similar to a
limited company, but the "partners"
(or members) are taxed on their share
of the proﬁts, not on the amount they
withdraw from the business.
Minimising tax liability is close to
the heart of every successful business
owner. While there's a plethora of tax
breaks available to SMEs, if you're
running a business it can be diﬃcult to
keep abreast of the law. For example,
the annual investment allowance
(AIA), which entitles you to claim on
the cost of most plant and machinery
up to the designated amount, has
changed several times since April
2008. Since January 2016, the AIA cap
has been £200,000, but there is no
guarantee it will stay at this level.
Since April 2013, companies have
also been allowed to apply a lower rate
of corporation tax on proﬁts earned
from patents. This patent box relief
has been phased in over a four-year
period. From April 2017, the rate of
corporation tax applied to proﬁts
earned from patents is 10%.
Research and development (R&D)
tax credits are another area where the
professionals can help you to boost
your ﬁnances. They are a valuable
government tax relief that rewards UK
companies for investing in innovation.
Basically, companies that spend money
developing new products, processes or
services - or enhancing existing ones
- are eligible for a cash payment and/
or corporation tax reduction.
R&D tax credit rates are the
equivalent of up to 33p for every £1 of
qualifying expenditure. They can be
used as an alternative to innovation
grants for research and development
funding. Sometimes they can
complement them too.
If eligible, you can typically claim
R&D tax relief for your last two
accounting periods. In other words,
while in your 2017 accounting period,
you can consider your R&D tax credit
2016 and your R&D tax credit 2015.
Credits are calculated based on your
R&D spend. "Qualifying expenditure"
is ﬁrst identiﬁed then enhanced by the
relevant rate to produce your
"enhanced expenditure". When
deducted from your taxable proﬁts, or
added to your loss, this will give you a
corporation tax reduction if you were
proﬁtable, a cash credit if you were
loss-making, or a combination of both.
However, calculating your
qualifying expenditure isn't always a
straightforward process and what is
64 YB2017 Tax Advice jw.indd 65