Seven tax breaks for SMEs

Research and development (R&D) tax credits

You are eligible for these reliefs if you’re: developing a new product/process; developing a product or process that already exists in an industry but the information to resolve the technical issue isn’t yet readily available or improving an existing product or process.

R & D tax credits available to SME have substantially increased over the recent years and this year the allowance has risen by an impressive 230%. The number of sme claiming them have increased but are still very low with KPMG finding that only 5% ever claimed R & D tax relief. This low figure is due to the fact that not many are aware of the scheme or knowing that they can claim against staff costs, material costs and utility expenses.


Seed enterprise investment scheme (SEIS)

If you’re a start-up or in the early stages of setting up and looking to raise funds and chosen to seek help from another source other than a bank such as an external investor. Launched in 2010, the scheme is still fairly new but reputable and encourages investors with a tax break of up to 50% whilst providing business owners with an alternative source of revenue.


Enterprise investment scheme (EIS)

This scheme works in a very similar way to the SEIS scheme but the difference is that investment is encouraged in higher risk SMEs while investors are enticed by income tax and capital gains tax reliefs as a result.


Tax break

Employment and National Insurance (NI)

The government has said to be reducing NI costs with many smes qualifying for a £2,000 employment allowance to reduce their NI costs. It’s estimated that 1.25 million smes will benefit from this allowance.

Smaller grants are also available for companies who wish to employ an apprentice member of staff under the apprenticeship grant for employers. This particular grant is only available to companies with less than 50 members of staff, and they must hire 16-24 year olds to work for them.


Property and machinery perks

If you’re looking to transform a building that’s been out of business for at least a year and bring it back into shape then you’ll most likely be entitled to financial help. The business premises renovation allowance offers sme a 100% allowance on building work but qualifying properties must be in a disadvantaged area and the break is only available until 2017.

Capital allowances are also available for smes that use machinery frequently. You can check which items are eligible on the HMRC website. There’s also an Enhanced capital allowance (ECA) scheme which provides smes with an enhanced tax relief when choosing to invest in energy saving equipment.


Small business rates relief scheme

This scheme allows smes with a single property and rateable value of up to £6,000 to claim back 100% relief. Those with a rateable value of between £6,000 and £12,000 can also benefit, with what’s known as a tapering relief. Businesses with a rateable value of up to £50,000 can get a discount of £1,500.


Rural rate relief

There are advantages and disadvantages of being located in a rural area. You may be the only newsagent in your local area or your business plan is to open a restaurant in a location which may be a bit far out from everything else. A financial benefit is that you can get between 50% and 100% off your business rates.

Rural rate relief is active if your location has a population of less than 3,000 people and your local council will be able to provide you with all of the necessary fine print when it comes to establishing your business in a rural area.


There are lots of other financial help available to smes, including local and industry specific grants. Running a business is time consuming and leaves you with little time to research about tax breaks but scheduling this time out can be very helpful in saving you if not lots, a bit of money along the way as every little helps. Make sure to make the most of it whilst they’re still around as well.


Sources: Business Zone, Liberis