If you would like to save a lot of tax on your profits there are several ways to do it.
You could simply not pay HMRC anything and then go and live in Paraguay. This is called tax evasion and is of course illegal. So don’t do it (anyway Paraguay is a probably a dump: Judith Chalmers never went there on “Wish you were here?” neither did Jill Dando).
Secondly, you could opt for one of the many tax planning strategies currently being marketed. Unfortunately they tend not to work (although you won’t go to jail or have to live in an alligator infested swamp in the middle of South America with only giant rodents and piranhas for company). Several that have recently failed in the courts I can remember being marketed as “sure things” only a few years ago.
Finally, you could try one of the “approved” schemes. There are a few ways of reducing your tax bill that can be agreed with HMRC beforehand. No worries about having a huge tax demand drop through the letterbox or get landed with an investigation into everything you have done financially in the past few years.
All legal and above board, my favourites are concerned with innovation: firstly the Research & Development Tax Credit, which was introduced by the then labour government back in 2000 to encourage innovative research and development which would in turn stimulate the economy.
If you are doing innovative research into new ideas or innovative development of those ideas into products or processes then you can claim. Essentially, for every £1 you spend you can pretend you spent £2.30 when calculating your corporation tax.
How good is that? You can even get money back if you are making a loss (as a lot of innovative companies do in the early days)
Secondly, once you have a new product, you can patent it and then pay only 10% (to keep it simple) corporation tax on the profits from selling it (or anything it goes into!)
Think that you don’t do any R&D, think again. Anything innovative and challenging could count (even if it didn’t work out, especially if it didn’t work out, as this means it almost certainly was innovative), just not solving your day to day problems.
There is a potential goldmine out there (especially with the patent scheme). If you think that you could qualify, give me a call or drop me an email.
Best wishes and have a great week.
Paul