With the Budget fast approaching, and access to funding still dominating the business agenda, how to save or defer tax should be high on your list of priorities. Remember that rates are going up significantly next year, so accelerating bonuses and dividends and deferring expenditure are popular topics of conversation.
But it’s not all bad news. For SMEs (small and medium-sized enterprises) considering purchasing or refurbishing their property, plant or equipment, it may be possible to finance part of that expenditure with an interest free loan and get tax relief on the expenditure through capital allowances as well.
Interest free loans for energy saving projects are available to SMEs from the Carbon Trust and will be based on the level of CO2 savings from the expenditure which the loan finances. Examples of energy saving projects could include improved heating, insulation and electrical systems, amongst others. The loan amounts will equate to £1,000 for each 1.5t of CO2 saving per annum expected from the installation. The loan is available whether or not the expenditure qualifies for tax allowances, with the repayment period being based on the expected energy savings from the installation. For example if £30,000 is borrowed and the energy savings are expected to achieve £10,000 per annum, the loan period will be 3 years. The maximum loan period is four years and loans can range from £3,000 to £500,000.
The types of equipment that can qualify include insulation, boilers, motors, refrigeration and heat recovery systems amongst others. These may well also qualify for capital allowances at the enhanced capital allowance rate of 100%, so it’s worthy of serious consideration.
The definition of a SME is as per the EU definition which looks at the business entity and its related or linked entities. An organisation is a SME if it has less than 250 employees and either turnover not exceeding €50m or a balance sheet total of €43m. This will cover the vast majority of businesses.
To continue this tax theme, today’s articles look at our latest Budget predictions and the helpful “time to pay” arrangements offered by HMRC to help businesses struggling with their cash flow. If you need more cash and haven’t yet looked at this opportunity, do it now! We also look at how accelerating the payment of dividends can avoid the even higher tax rates coming into force in the new tax year.
Finally, Mark Boughey looks at how to use the ‘AA approach’ to buy businesses in distress – a topical issue for investors, and trade buyers as the economy hopefully recovers.
As always, please don’t hesitate to contact me with your thoughts and, for more information and updates, don’t forget to register with our entrepreneurs’ platform at www.smith.williamson.co.uk/entrepreneurs/registration.