5 ways you can improve cash flow with efficient Business tax planning

Recent economic challenges have led many companies to focus their attention on ways to improve cash flows. An effective way to achieve this is through business tax planning. This reduces taxable profits, allows organisations to access valuable reliefs, and generates potential tax repayments.

5 ways effective Business tax planning can improve cash flow

1. Capital Allowances

Capital Allowances are often overlooked, but can be a valuable tool to reduce taxable profits, generating deductions of up to 100% of the qualifying capital expenditure incurred.

If you have incurred significant expenditure on property renovations in the last 2 years, a review of the expenditure should be undertaken to maximise any Capital Allowances available.

2. Research and Development (R&D)

Companies involved in a qualifying R&D activity may claim additional tax relief on certain costs incurred directly in the process. The rate at which relief is given is dependent on various factors.

If you have undertaken activities which you think may qualify for R&D tax relief, you have a 2-year period to make a claim. Small and Medium Enterprises can surrender tax losses generated by R&D tax relief to create a cash repayment.

3. Quarterly Instalment Payments (QIP)

On 1 April 2015, the rules surrounding companies within the QIP regime changed. As a result, companies which had previously paid Corporation Tax (CT) via QIPs may no longer be required to do so. This assists in alleviating short-term cash flow burdens.

4. Foreign Tax Credits (FTC)

Companies that have undertaken operations overseas may have suffered withholding tax (WHT) on receipts. It may be possible to claim tax relief against UK CT on a pound-for-pound basis for any WHT which has been suffered, potentially generating a substantial repayment. A claim for FTC can be made up to 4 years after the end of the accounting period in which the WHT was suffered.

5. Losses

Current market conditions have resulted in previously profitable companies making losses. If a company has been profitable and paid CT in the last 12 months, there is potential to utilise these current year losses against the prior year’s profits and generate a tax repayment.

Liaising with your tax advisors as early as possible may allow you to access these repayments at an earlier stage. This can be of great benefit to companies where Time To Pay arrangements are in place for tax liabilities currently overdue.

How AAB Can Help

Need help with effective tax planning? Our Comprehensive Business Tax Services are here to help you achieve the best possible outcome.

Get in touch with Alan Campbell, Partner & Head of Corporate Tax, or your usual AAB contact.