6% Increase in Corporation Tax could impact many local businesses

The Increase - What you need to know

The dramatic increase in Corporation Tax has been on the cards for some time, with a rise to 25% (from the current 19%) for businesses with profits exceeding £250,000, but there were doubts over whether it would actually happen – especially with Liz Truss attempting to cancel it in her mini budget in 2022.

For businesses with profits under £50,000 the Corporation Tax remains at 19%, although an effective Corporation Tax rate of 26.5% is applied to profits between £50,001 and £250,000.

There are some tax mitigation options for businesses to consider, including 100% tax relief for investment in fixed assets, and an extension of R&D qualifying expenditure to include data and cloud computing costs. Pension contribution considerations, or business restructuring to mitigate ‘associated company rules’.

Philip George, partner at Forrester Boyd comments; “The Government will argue that 70% of businesses don’t exceed the £50,000 profits threshold and won’t pay more tax, but this ignores the fact that medium-sized and larger companies drive the economy and are responsible for innovation and growth. While the government needs to start balancing the books, a 6% rise in Corporation Tax is a questionable solution as it appears to be disincentivising investment and growth. We would definitely advise businesses to consider their options as there are various opportunities for tax mitigation.”

How we can help

Corporation tax represents a substantial part of your trading costs. Plus, the increased reporting obligations, robust investigation policies on the part of tax authorities, and harsher penalties for non-compliance mean that an undue amount of your time and resources can be taken up collecting revenue for the government.

We offer a range of services to help you minimise your corporate tax exposure and reduce the administrative burden of complying with tax legislation.

These start from working with you to agree on the most effective structure for your business and include strategies that enable you to take best advantage of tax relief while ensuring rigorous compliance.

Efficient corporate tax planning can potentially result in significant improvements on your bottom line.

To find out more about how to maximise the efficiency of your tax planning, contact us today.