Whether you are setting up a new business, or already have a successful, well-established company, there are many ways that you can save money through tax reliefs and allowances.

Certain tax initiatives even allow business owners to save money that can be invested in their company.

Enhanced Capital Allowance (ECA)

Enhanced Capital Allowance (ECA) schemes encourage businesses to invest in efficient technologies. The scheme lets your business claim 100 per cent first-year allowances, i.e., tax relief, on investments in certain technologies and products.

If you buy an asset that qualifies for first-year allowances you can deduct the full cost from your profits before tax.

You can claim first-year allowances in addition to the Annual Investment Allowance (AIA) – they do not count towards your AIA limit.

What qualifies

• Some cars with low CO2 emissions
• Energy-saving equipment that’s on the energy technology product list, for example, certain motors
• Water-saving equipment that’s on the water-efficient technologies product list, for example, meters, efficient toilets and taps
• Plant and machinery for gas refuelling stations, for example, storage tanks, pumps
• Gas, biogas, and hydrogen refuelling equipment
• New zero-emission goods vehicles.

You cannot normally claim on items your business buys to lease to other people or for use within a home you let out.

Annual Investment Allowance

This measure remains temporarily increased from £200,000 to £1,000,000 for qualifying expenditure on plant and machinery incurred during the period from 1 January 2022 to 31 March 2023.

This measure is intended to deliver positive outcomes for businesses by supporting and encouraging business investment, and by simplifying the tax relief for such investments.

R&D tax credits

You may be eligible for R&D tax credits, even if your small business is running at a loss.

The HM Revenue & Customs (HMRC) definition is broad, and you don’t have to be engaged in laboratory work to benefit from this incentive.

Software developers, architects and many other professionals have all successfully claimed R&D tax relief because of this incentive.

Repairs and renovations to property

The business renovation allowance will give SMEs a tax break.

If the building your business plans to use has been empty for more than a year and was previously used in a different capacity, you may be eligible for a 100 per cent tax incentive on any renovations you might carry out.

Reduce NICs with the Employment Allowance

You can claim Employment Allowance if you’re a business or charity and your employers’ Class 1 National Insurance liabilities were less than £100,000 in the previous tax year.

Employment Allowance allows eligible employers to reduce their annual National Insurance liability by up to £4,000.

You’ll pay less employers’ Class 1 National Insurance each time you run your payroll until the £4,000 has gone or the tax year ends (whichever is sooner).

You can only claim against your employers’ Class 1 National Insurance liability up to a maximum of £4,000 each tax year. You can still claim the allowance if your liability was less than £4,000 a year.

In some cases, a company can eliminate their Employer’s NIC bill as a result. Note, it is not possible to claim the allowance if your company only has one employee/director.

According to a new survey from the Federation of Small Business (FSB), more than 440,000 small businesses could fail because of a new late payment crisis.

The national small business organisation has called for the Government to step in and take urgent action to improve how companies are paid.

According to the FSB study, 30 per cent of small businesses have seen the late payment of invoices increase over the last three months, of which almost eight per cent said that the problem was so bad that it might force them to close.

While smaller companies wait to get paid, they must continue to pay their suppliers, tax bills and staff wages.

The effect of persistent overdue payment problems is that it has a ripple effect throughout the wider economy, forcing other companies to close their doors as well.

The FSB estimates that more than 400,000 small firms have shut during the pandemic, with late payments being a key factor in the failure of many companies. However, it predicts that up to 440,000 SMEs may be forced to close this year due to late payments.

FSB National Chair, Mike Cherry, said: “Late payment was destroying thousands of small businesses even before the pandemic hit – the pandemic has made matters worse. In the past, the Government has rightly identified greater board accountability as key to spurring change in this area, but delivery has been slow.”

The FSB wants to see every business and Government agency abide by the existing prompt payment code.

They argue that 30-day payment terms should be “the norm for those who are committed to environmental, social and governance best practice”.

However, it has gone further saying that every big UK corporation should have a dedicated director that is focused on improving payments to small businesses.

Link: UK’s late payment ‘crisis’ risks future of 440,000 small firms

A pilot scheme using software in preparation for the next phase of HM Revenue & Customs’ (HMRC) Making Tax Digital (MTD) initiative has seen a slump in users.

Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for Income Tax and Self-Assessment (ITSA) from 6 April 2024.

Some businesses and agents are already keeping digital records and providing updates to HMRC as part of the live pilot project to evaluate and develop the MTD service for ITSA.

However, research reported in the Financial Times has discovered that only nine people are currently taking part in the trial, a figure confirmed by HMRC.

The number peaked at around 900 users in the 2018-2019 period and may have since been affected by the pandemic.

Many accountants are now concerned that the system, which covers 4.3 million self-employed businesses, partnerships, and landlords, many of whom will be unaware of what is happening, may not be ready for the switchover.

Currently the self-employed must file just one end-of-year tax return but MTD ITSA will involve having to submit updates quarterly every three months and an end-of-year statement, plus a “finalisation return” (now called a tax return) each year. This means six reports to HMRC in total replacing the current single annual Self-Assessment tax return.

On top of this, the self-employed and landlords will have to license accounting software from approved providers, with the Government offering discounts of up to £5,000 for small businesses to rent software.

Link: Just nine people trialling digital tax for self-employed

Two company directors have been banned for a total of 21 years after they fraudulently claimed £100,000 in bounce back loans.

Following an investigation by the Insolvency Service, Aamer Aslam from Huddersfield and Razwan Ashraf from Keighley were disqualified for 11 and 10 years respectively after they fraudulently claimed Bounce Back Loans (BBL).

The disqualifications prevent both from directly, or indirectly, becoming involved in the promotion, formation, or management of a company, without the permission of the court.

The duo were co-directors of Scholars Academy Ltd, which is a specialist tuition centre for children in West Yorkshire.

In May 2020 Aslam applied for a BBL by providing an estimated company turnover of £200,000. Scholars received the loan of £50,000 but went into voluntary liquidation in January 2021, which triggered the investigation by the Insolvency Service.

At the time of liquidation, the directors listed the company’s liabilities to the bank as £7,000, but the bank later notified the liquidator that it was owed £50,000 by the company due to the BBL.

The investigation found that the duo was inflating the company’s turnover with Scholars’ bank statements actually showing a maximum monthly income of just £640, which means their turnover was only £7,680 and did not meet the criteria to apply for a BBL.

It was also found that Aslam and Ashraf used the money to make monthly payments to four family members of Ashraf. All four received £2,000 a month after the duo received the loan money.

Aslam and Ashraf told the Insolvency Service that these payments were genuine business expenses, but they were unable to provide evidence to support this.

Alongside this, Ashraf was also the sole director of another educational company, Progress First Ltd, and in May 2020 he applied for a BBL and fraudulently declared in the application form that annual turnover in 2019 was £200,000, when Progress’ bank statements showed that turnover was £38,973.

This resulted in Progress receiving the full loan of £50,000, when it would only have been entitled to a loan of £9,927.

Ashraf claimed that the money was used to pay for company expenses, however, regular payments were made to three individuals, and no evidence was produced to show that these payments were genuine business expenditures.

Ashraf has since repaid £35,000 to the liquidator to settle claims against him for the Progress loan, and a further £25,000 in settlement of claims against both directors about the loans taken out by Scholars.

COVID crackdown

This is the latest in a number of bans issued by the Insolvency Service against directors who have misused the COVID support schemes.

The Insolvency Service has been given new powers to investigate, disqualify and potentially prosecute company directors who abuse the company dissolution process.

The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act will also help tackle directors dissolving companies to avoid repaying Government-backed loans taken out during the Coronavirus pandemic.

Under the terms of the Act, the Insolvency Service, on behalf of the Business Secretary, will be able to investigate and tackle ‘unfit’ directors who place their firm in administration to avoid paying subcontractors and suppliers.

If misconduct is found, directors can face sanctions, including being disqualified as a company director for up to 15 years or, in the most serious of cases, prosecution.

The Business Secretary will also be able to apply to the court for an order to require a disqualified director of a fraudulently dissolved company to pay compensation to creditors who have lost out due to their actions.

In addition, the Insolvency Service will be able to investigate live companies where there is evidence of wrongdoing, such as misuse of COVID support.

Link: Bans for two directors who abused Bounce Back Loan scheme

It was recently announced that the Government would reform business rates relief for owners of second homes – resulting in some holiday let owners facing additional costs of up to £1,000 a year.

The Department for Housing, Communities and Local Government wants to close what it sees as a loophole in the current business rates system that prevents some second homeowners from paying council tax.

Michael Gove, Secretary of State for Housing, Communities and Local Government, confirmed that new rules next year will only allow second homeowners to register for business rates relief if they can prove they rent out their properties for at least 70 days per year.

What exactly is changing?

As the rules stand, second homeowners pay business rates, which are cheaper than council tax, if they make their property available for letting for 140 days in the coming year.

But once the change takes place in April next year, homeowners will have to prove they are let for at least 70 days a year or be forced to pay council tax instead.

Is the change necessary?

The move comes following a surge in the number of holiday lets in England, with around 65,000 residential units currently registered, up from 50,960 in 2019.

The Department for Levelling Up, Housing and Communities (DLUHC) also says that there is currently ‘no requirement’ to produce evidence that a second home has been let out – not just left empty.

The DLUHC says the move would protect ‘genuine’ small holiday letting businesses and ensure second-home owners paid a ‘fair’ contribution towards public services.

Mr Gove’s plans come after a consultation launched in 2018 and threats last year by the Treasury to close the loophole.

According to reports, the number of holiday lets in England has been increasing year on year from 50,960 in 2019 to 65,000 now.

The COVID pandemic is said to have fuelled the trend, as London and other city dwellers sought to escape to the countryside.

Link: Gove closes tax loophole on second homes

It’s a new year and many people who may have lost their jobs during the pandemic or have decided to take their life in a new direction, will be looking to start up a business.

It could be a full-time endeavour or a part-time business looking to make a bit of extra income to cope with the current cost of living crisis.

The upside is that we appear to be over the worst of the pandemic, and it is in the Government’s interests to get the economy on the move again, so help will be available.

There are so many ideas for business start-ups, but insurance broker Simply Business has researched some of the most popular small business ideas that might be worth exploring for 2022.

After analysing new business insurance policies taken out, a number of key areas came up as the most popular for starting up this year.

They include:

Craft stall

According to Simply Business, craft stalls were the fastest-growing small business trade in 2021, experiencing a 237 per cent growth.

If you have a hobby like candle making, pottery or needlework, opening a craft stall to sell your wares could be a venture worth pursuing this year.

Market trader

COVID restrictions, as well as people feeling less comfortable in indoor spaces, have seen outdoor businesses thrive since 2020.

It’s no surprise, then, that market trading was the second-fastest-growing small business idea in 2021, with a 113 per cent increase.

Online retailer

According to Simply Business, the number of new online retailers increased by 62 per cent in 2021.

When it comes to selling goods online, the key is to do your research and select the right type of product.

Some of the products that have traditionally sold well online include homeware, tech gadgets and accessories, exercise gear and clothing.

Photographer

The number of freelance photographers in the UK increased by 56 per cent in 2021, making it the fourth-fastest-growing small business.

This could be the ideal year to launch a freelance photography business, especially if you specialise in wedding photography.

The number of weddings is expected to increase significantly this year because of all the postponements.

Handyman or handywoman

One of the impacts of the pandemic is that many people have been spending more time at home.

Not surprisingly, many have been finding issues with the current state of their properties and have been looking to make improvements or upgrades.

The result has been an increase in demand for repair people, with a 44 per cent rise in this type of business in 2021.

Catering

Catering businesses witnessed a 39 per cent rise in 2021.

If you have a passion for cooking, throwing parties or event planning, catering could be a great small business to consider starting this year.

Teaching/tutor

Research by Simply Business shows that the number of businesses in this sector was up 21 per cent in 2021 and teaching or tutoring (in person or online) could be a great small business idea for people who have teaching experience.

Home baking

People have been cooking and baking more at home during the pandemic.

Not surprisingly, some have looked to use their cooking and baking skills to provide income.

As a result, the number of UK home baking businesses saw an increase of 24 per cent between 2020 and 2021.

Dog walking

Millions of Brits have bought pets since the start of the pandemic.

This means that the demand for pet walkers is now higher than ever. New dog walking businesses have increased by 22 per cent year on year.

If you love dogs, starting a dog walking business could be a great way to make some cash this year.