In the current economic conditions, the focus for many business owners will be on how they can retain cash in their businesses as well as looking at any opportunity to bring cash into the business using reliefs and incentives inherent in the UK tax system.

Reviewing your cash flow and reforecasting accordingly for the short-term is essential during this turbulent time, and tax incentives can play a part in this. The available reliefs have the potential to reduce tax liabilities and in some situations can result in cash payments from HMRC.

Here are some of the key options available to businesses now:

Capital Allowances claims on historic expenditure

In the situation where an asset is still owned by the business it is possible to make claims on historic expenditure that has not yet been allocated to a pool, these claims can be made in an open tax return, regardless of when the expenditure was incurred. Similarly, where claiming Capital Allowances has not been prioritised in the past, any additional allowances that can be identified have the potential for an immediate cash tax repayment from HMRC.

Enhanced Capital Allowances (ECAs) tax credits

If a business is loss making and expenditure is incurred on qualifying energy and/or water saving technologies before 1 April 2020, a payable cash tax credit of 13% of the allowances identified could potentially be available. The process will require an adviser who has in-depth knowledge and an understanding of mechanical and electrical installations in commercial buildings.

Land Remediation Relief (LRR) tax credits

Like ECAs if a company is loss making a payable cash tax credit is available where expenditure was incurred in remediating land. The term ‘remediating land’ not only covers the decontamination of soil but can also cover the removal of asbestos from buildings and the eradication of Japanese knotweed. It is available to both investors and developers but not available to the original polluter under the ‘polluter pays’ principle. As with ECAs, using a professional adviser who has technical knowledge of the built environment and construction processes will ensure the best outcome.

Short Life Assets (SLAs)

Where a business has incurred expenditure in the last two financial years on assets with a short life of eight years or less, a capital allowances election can be put in place that will fast track the available tax relief. This process has the potential to generate significant tax savings and is suited to businesses with significant small asset expenditure involved in sectors such as hotels, food and drink, leisure and healthcare.

For a specific overview of the reliefs available for Construction & Property projects, please read our last blog on Tax incentives for construction and property projects.

Our specialist Construction & Property Incentives Team are on hand to help and advise you on all of the above reliefs. 

Research and Development Tax Credits

Research and Development Allowances (RDAs)

Where a company has incurred capital expenditure for the purpose of carrying out research and development (R&D) or for providing facilities for carrying out R&D, it can claim a tax deduction equal to 100% of the eligible expenditure. Providing that the capital spend is incurred for these reasons, there are very few restrictions and there is no limit to the amount of RDAs that can be claimed. This means that, even with the extension of the £1m Annual Investment Allowance limit and the introduction of Structures and Buildings Allowances, RDAs can accelerate tax relief due. 

Many companies are looking to accelerate the submission of their R&D tax credit claims to obtain the cash flow advantage as soon as possible. In response, HMRC has increased their resource dedicated to R&D claim processing and are currently turning SME and RDEC claims around within 30 days of receipt.

Companies claiming other government-backed coronavirus financial supports (such as the Coronavirus Job Retention Scheme, or the Coronavirus Business Interruption Loan Scheme) are not prevented from claiming R&D tax credits too.

As a reminder, companies spending money developing new products, processes or services can claim a cash payment via an R&D tax credit claim. Companies that haven’t claimed in the past can look back over their spend for the last two accounting periods. Companies can claim between 10% and 33% in cash on their eligible spend. Our experienced Innovation Taxes Team are on hand to help you with any R&D queries or potential claims you feel you may have.

Get in touch - we're here to help

We're already helping clients identify areas in which these reliefs could apply. If you feel your business may be eligible for any of the above reliefs, get in touch with our specialists teams now, and we can get the ball rolling.

For R&D relief queries please contact David Ward at David.Ward@jcca.co.uk.

For capital allowances, short life assets and land remediation relief queries please contact Michael.Murray@jcca.co.uk or Robert.Winters@jcca.co.uk.