Tax Savings for SMEs
Despite the difficult economic environment, there are still some tax reliefs to be found.
The following are a selection of tax reliefs and exemptions for companies which have been introduced to stimulate the economy and encourage a greener environment, as well as some existing reliefs for trading losses.
Research & Development
The R&D tax credit is available for companies carrying on R&D activities in the European Economic Area (EEA) in a relevant period.
From 1 January 2009 the R&D tax credit has increased from 20% to 25% of the qualifying R&D expenditure spend.
The definition of research and development activities is extensive and includes systematic, investigative or experimental activities in the field of science or technology. For more informaiton see R&D Tax Credit.
100% Capital Allowances in year 1 for Energy Efficient Equipment
Certain energy efficient equipment qualify for 100% capital allowances in year 1 rather than spreading the cost over a number of years. There is a list of specific qualifying equipment which includes catering and hospitality equipment, electric vehicles and IT systems. If you are planning on purchasing energy efficient equipment in the near future, please check the list of equipment on the SEI website to see if it qualifies. Note this applies to companies only – not sole traders.
Exemption for Start-up CompaniesQualifying new companies are exempt from Corporation Tax for the first three years, provided the Corporation Tax liability is less than €40,000 per annum – marginal releif available.
Did you know that trading losses can be used in the following ways?
1. Offset against the total profits of the company’s current accounting period (income from all sources plus chargeable gains excluding gains on development land).
2. Carried back and set against profits of the immediately preceding accounting period(s) of the same length as the accounting period in which the loss was generated where the company was carrying on the same trade in those period(s) also.
3. Carried forward, without time limit, and set against profits from the same trade in subsequent accounting periods.
Note: in order to benefit fully from the use of trading losses the company’s corporation tax returns will need to be filed on time with the Revenue Commissioners. Otherwise Revenue will restrict the use of such losses.
Where a company incurs a loss in its last period of trading, terminal loss relief provides an element of relief in these situations by providing that losses incurred in the last year of trading can be carried back against income from the same trade in the 3 years preceding those last 12 months.
As always, if you have any queries on the above, please leave a comment or email me at email@example.com.