Four enhanced tax reliefs for businesses

A company may be able to claim enhanced tax reliefs which give a tax deduction of more than 100% for a range of expenditure which HMRC are seeking to encourage, including:

  1. Research and Development (R&D)
  2. Patent Box
  3. Creative Sector rax reliefs
  4. Land Remediation reliefs

1. Research and Development

Small and medium-sized companies (SMEs) are given an enhanced deduction against tax of 230% of the actual eligible costs incurred, with the chance of actual cash refunds in loss-making situations. For large companies, the basic tax relief is an “above the line” taxable credit of 12% of qualifying expenditure.

R&D broadly applies where work is being carried out to overcome scientific or technical uncertainty. The eligible expenditure covers staffing costs, consumables, certain other costs such as power, fuel, water and software, sub-contracted work and externally provided workers. It must be related to a trade carried on by the company or be expenditure from which it is intended that such a trade will be derived.

2. Patent Box Regime

The Patent Box provisions introduced in 2012 can also currently be utilised to reduce tax following R&D activities that culminate in patented innovations. The Patent Box regime is being phased in to effectively apply a 10% tax rate to all profits attributable to products, processes or royalties that carry or include a qualifying patent.

Changes were made to the regime to change the method of calculation for new entrants to the scheme joining after June 2016. Existing entrants are able to continue using the method on patents applied for pre-June2016 until June 2021.

3. Creative Sector

Creative sector tax reliefs are a growing suite of special tax breaks that are being made available. Examples of this include films, animation programmes, high-end TV programmes, video games, theatres and orchestras. The Finance Act (No 2) 2017, has added tax relief for the production of museum and gallery exhibitions, with effect from 1 April 2017.

4. Land Remediation Reliefs

Relief can be available on the cost of cleaning up land which had been acquired in a contaminated state. The relief is 150% of the costs incurred and can apply irrespective of whether the costs have been treated as revenue or capital in the financial statements. A similar relief may be available for companies that bring long term derelict land back into use.

Read more in our Tax Planning Guide


If you require any further advice on enhanced tax reliefs you can get in touch with one of our business tax experts on 01903 234094.