UK Tax Benefits For Small Businesses

Small businesses owners

How Small Foreign Businesses Can Get the Best Out of UK Tax Benefits

The UK tax system offers several tax incentives and relief that investors and owners of small businesses can take advantage of, but for a company to enjoy such benefits, it has to establish a taxable presence in the UK.


  • It has to have a fixed place of business where whole or a part of its operation is carried out. A company that merely buys or delivers products to the UK does not fulfil this particular requirement.
  • It must have a dependent agent that is defined as “an agent acting on behalf of the company has and habitually exercises authority to do business on behalf of a company”. That is, the agent “habitually” concludes contracts on behalf of the foreign business.

How can a small foreign business get the best out of UK tax

Undertake research and development (R&D)

To encourage small medium and large businesses to undertake certain types of R&D, the Research and Development Tax Credits were introduced. If your company is subject to UK corporation tax and spends at least £10,000 annually on qualifying R&D, you will be entitled to 175% relief on R&D spending. If your company is in a loss making position, you get cash payment of £24 for every £100 spent on qualifying R&D.

On 1 April 2015, the SME scheme enhanced deduction will increase to 230%. Profitable SMEs can enjoy an increase in benefits of up to 26%, while companies that are losing can claim a tax credit increase of up to 33.35%.

Better start checking out which R&D is qualified, then.

Get relief from your property

If the rateable value of your fixed place of business is under £12,000 per year, you could be eligible for a 100% small business rate relief. Make sure to contact your local council before this incentive ends, which is on 31 March 2015. Take note, however, that this is only applicable for small businesses that only use one property and meets the required rateable value.

Pay less per year on employer National Insurance

As a small business, you probably have just a few employees. With a newly introduced scheme called Employment Allowance, you may be able to save from National Insurance. This is especially true if you only pay less than £2000 per year. To qualify, however, you must pay Class 1 National Insurance for the past years. You can refer to a tax professional to determine your status.

Invest in other small companies

If you invest in small companies, you can benefit from 3 separate tax incentive schemes – Enterprise Investment Scheme (EIS), Venture Capital Trusts (VCTs), and Corporate Venturing Scheme (CVS). Previously, the relief from EIS is only up to 20% of the investment in shares acquired, but recent changes have added a 30% tax relief for up to £1 million investments on new shares issued.

There are other tax benefits that foreign owners of small businesses can enjoy. But the easiest way to gain relief is to avoid being penalised for late filing, so you do not end up paying for expensive fines.


Photo by Patrick Tomasso on Unsplash

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