12 tax advantages of using a company as a business vehicle

  1. If the UK company taxable profits are £300,000 or less, a stand-alone company will normally pay corporation tax at just 21% (‘small companies’ rate’).
  2. This small companies’ rate reduces to 20% with effect from 1 April 2011.
  3. The standard rate of corporation tax is 28%. It will be reduced to 27% with effect from 1 April 2011 and there are plans to reduce it by 1% each year until the main rate is 24% by 2014. This rate applies to ‘large companies’ or those with taxable profits of £1.5m+ if stand-alone.
  4. Company structure allows for cash to be rolled up with low(ish) rates of tax suffered –  see points 1 and 2 above.
  5. Corporation tax is not payable until 9 months after the end of the accounting period for the majority of companies.
  6. R&D tax credits and other tax incentives are available for innovative companies.
  7. Remuneration strategies can be managed to optimise the personal tax position of investors and business owners.
  8. Investors in unquoted companies can obtain income tax relief on their equity investment e.g under Enterprise Investment Scheme (EIS).
  9. Shareholding investments in unquoted trading companies can attract 100% relief (exclusion from your estate) for inheritance tax purposes.
  10. Key employees can be incentivised through HM Revenue & Customs approved share schemes such as the Enterprise Management Incentive Scheme (EMI).
  11. Income on UK patents could be subject to a lower rate of corporation tax at just 10% (although unlikely to be introduced before April 2013).
  12. Companies within a corporate group (minimum of 75% common ownership of parent company) can shelter current year tax losses against taxable profits of other group companies.

More to come…

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