All businesses can benefit from having a financial spring clean, whether that involves checking your records, banking or preparing for R&D tax credit claims. MPA Group, the innovation funding specialists, have put together five top tips to help get your books in order.
1. Be aware of recent changes
With each tax year, there are always a few changes that businesses should be aware of. Some of the changes this year involved personal allowance, Income Tax, dividends and workplace pensions.
The amount you can earn before paying Income Tax increased at the start of this new tax year. The threshold moved from £11,850 to £12,500, which will see most people saving an average of £130 a year in tax. This also means that businesses are allowed to take more in dividends before moving to the higher dividends tax rate.
The minimum amount you will need to pay into your employees’ auto-enrolment workplace pensions has also changed, from 5% to a minimum of 8% of the individual’s qualifying earnings.
2. Reduce energy emissions / become a zero-waste office
Going through the year’s paperwork will undoubtedly highlight the amount of waste you are producing. This makes it the perfect time to start thinking about becoming a zero-waste office.
There are many ways to do this and the Making Tax Digital scheme, which went live on the 1st April 2019, will certainly help. You should look to keep as many records as you can on cloud software to reduce the amount of physical waste. Simple changes like ensuring things such as switches, printers, monitors and heaters are all switched off at the end of the day can go a long way to making a difference to energy emissions and save offices considerable amounts of money.
3. Make sure your records are up to date
It is important to go through your company records and accounts and check that everything is up to date. Check that all paid invoices, expenses, salaries and pension contributions are accounted for. This is especially important if you don’t use software to run your business bank account, as paper files can easily slip through the net.
Keeping everything up to date allows you to make accurate assessments of your company’s profit, as well as identifying any tax due and the dividend that you can pay yourself. However, remember that any dividends should come from available company profits.
4. Apply for R&D Tax Credits
Remember to claim tax credits for any time your company has spent on research and development. If your business has spent money on starting projects that explore new processes, products or services in the last two years then you should be eligible to claim.
Fewer than one in five (19%) businesses that can be classed as being ‘innovation active’ have claimed money back for their time developing new products or processes, so it is worth checking to see if you qualify.
5. Register for Patent Box
If it’s applicable to your business, be sure to take advantage of the government’s UK Patent Box initiative. Simply put, the scheme is a way to reward companies that invest in innovation.
Patent Box enables companies to pay a reduced Corporation Tax rate of 10% on any profits that are a result of sales of products or services that contain a qualifying patented innovation. These products and services can be as small as a technical improvement on an existing product or process. Currently only 3% of eligible companies, who currently claim R&D tax credits, take advantage of Patent Box, so your business could be missing out on great returns.