Scotland’s businesses should capitalise on historically low corporate tax rates by investing in their businesses during 2019. There has probably never been a better time to take advantage of various tax incentives for business investment.

Whilst changes to corporate interest deductions are hitting large businesses hard, there are very attractive incentives for certain expenditure suitable for all companies, including capital allowances, investment in R&D and a new regime designed to encourage investment in buildings and structures. There are also tax incentives for investment in energy/efficiency-savings related projects, which attract accelerated or even 100% tax relief.

We now have one of the lowest corporation tax rates for many years, and the rate is set to fall to 17% in 2020, with speculation that it could fall even further to encourage post-Brexit inward investment. However, businesses need to be mindful that several of these allowances will stop in April 2020, so there are compelling reasons to take advantage of these deals sooner rather than later.

Due to the complexity of some of the incentives it is easy to fall foul of HMRC and incur significant charges and penalties.

HMRC is supportive of computations which include well laid out cost analysis and facts documenting and underpinning claims, but they take a grim view of unsubstantiated and arbitrary allocations, and where the paperwork is not robust. Long-life assets, whilst often highly subjective, can be a trap for the unwary as recent Revenue challenges have shown. Effective use of Annual Investment Allowances rules speeds up tax relief and will be increased to £1m for two years from 1 January 2019. The timing of spend and ensuring correct documentation are therefore crucial.

That said, a sound tax relief strategy boosts cash flow, sharpens competitiveness and enhances profitability. Notwithstanding the economic uncertainty, we should all resolve to make 2019 the year in which we take advantage of low corporate tax rates by investing in the future of our businesses.

If you want to discuss any of the points raised in this blog please get in touch with me here, or:

Mark Pryce
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in December 2018. Laws and tax rules may change in the future.