The recent downturn in the Oil and Gas industry has led to many companies focusing their attention on ways to improve cash flows. An effective way to achieve this is through tax planning which can reduce taxable profits, allow businesses to access valuable reliefs and potentially generate tax repayments.
Capital Allowances are often overlooked but can be a valuable tool to reduce taxable profits, generating deductions of up to 100% of the qualifying capital expenditure incurred. If you have incurred significant expenditure on property renovations in the previous 2 years, a review of the expenditure should be undertaken to maximise any Capital Allowances available which could result in significant tax savings.
Research and Development (R&D)
Companies involved in a qualifying R&D activity may claim additional tax relief on certain costs incurred directly in the R&D process. The rate at which relief is given is dependent on various factors however it is possible to access additional relief of up to 130%. If you have undertaken activities which you think may qualify for R&D tax relief you have a 2 year period to claim such relief. Small and Medium Enterprises can surrender tax losses generated by R&D tax relief to create a cash repayment.
Quarterly Instalment Payments (QIP)
From 1 April 2015 the rules surrounding companies within the QIP regime have changed. As a result, companies which have previously paid Corporation Tax (CT) by QIP’s may no longer be required to do so. This will assist in alleviating short term cash flow burdens although ultimately the CT will still fall due to be paid.
Foreign Tax Credits (FTC)
Companies who have undertaken operations overseas may have suffered withholding tax (WHT) on receipts. It may be possible to claim tax relief against UK CT on a pound for pound basis for any WHT which has been suffered, potentially generating a substantial repayment. A claim for FTC can be made up to 4 years after the end of the accounting period in which the WHT was suffered.
The current market may result in previously profitable companies making current year tax losses. If a company has been profitable and paid CT in the previous 12 months there is, potential to utilise these current year losses against the prior year’s profits and generate a tax repayment. Liaising with your tax advisors as early as possible may allow you to access these repayments at an earlier stage. This can be of great benefit to companies where Time To Pay arrangements are in place for tax liabilities currently overdue.