1. Tax Planning Ideas for Companies John Rodger – Director of Corporate Tax Services Neil Norman – Corporate Tax Manager DATE

2. Introduction  Recent press coverage  Today’s talk  Tax reviews  The review should cover  Possibilities for reducing taxable profits (or incurring losses)  Utilisation of existing tax losses  Capital expenditure plans for capital allowances and roll over relief purposes  Timing of dividend payments  Significant proposed property transactions  Capital investment and revenue expenditure plans  Planned group or company reorganisations  PAYE and VAT matters  Commercial Factors  Short to medium term aims of the company  Impact on the company liquidity or borrowing requirements  Impact on the company’s credit rating 28 June 2012 Tax Planning Ideas for Companies 2

3. Deferral of Taxable Profits  Timing  Corporation tax rates Main rate  2012 – 24%  2012 – 23%  2014 – 22% Small profits rate  2012 – 20%  2013 – to be announced  10% corporation tax rate on the way  Losses 28 June 2012 Tax Planning Ideas for Companies 3

4. Deferring Income Examples include:  Timing sales of goods or services  Selling goods on consignment  Extending or shortening the accounting period 28 June 2012 Tax Planning Ideas for Companies 4

5. Advancing Revenue Expenditure Examples include  Accelerating bonuses  Making additional pension contributions  Embarking upon a new trading venture which will generate tax losses in the early years  Use of specific provisions i.e. slow moving stocks, bad debt, redundancy  The timing of discretionary expenditure i.e. Donations  Accelerate qualifying research and development expenditure for enhanced relief 28 June 2012 Tax Planning Ideas for Companies 5

6. Capital Allowances Background  Annual Investment Allowances “AIA” reduced from £100,000 to £25,000 from 1 April 2012  WDA for expenditure in excess of AIA  General pool reduced from 20% WDA to 18% from 1 April 2012  Special rate pool reduced from 10% WDA to 8% from 1 April 2012 28 June 2012 Tax Planning Ideas for Companies 6

7. Capital Allowances  AIA for periods straddling 1 April 2012  Example – Company which has an April year end. Max AIA: 1/5/11 – 31/3/12£ (336 days / 366) x £100,00091,803 1/4/12 – 30/4/12 (30 days / 366) x £25,000 2,049 93,852  Expenditure incurred on the date on which the obligation to pay becomes unconditional 7 28 June 2012 Tax Planning Ideas for Companies

8. Capital Allowances  Short life asset elections  Example a company buys some plant for £10,000 and disposes off it in year 3 for £1,000 28 June 2012 Tax Planning Ideas for Companies 8 General Pool £SLA pool £ Purchase10,000 Yr 1 – CA claim 18% assuming AIA not available (1,800) TWDV c/fwd to Yr 28,200 Yr 2 - CA claim 18%(1,476) TWDV c/fwd to Yr 36,724 Yr 3 - Disposal(1,000) 5,729 Yr 3 – CA claim / balancing allowance (1,030)(5,724) TWDV c/fwd to Yr 44,6940

9. Capital Allowances  Energy saving or environmentally beneficial plant or machinery  100% tax relief; or  19% tax credit of the surrendable loss  Changes to the capital allowance regime for commercial property purchases from 1 April 2012 28 June 2012 Tax Planning Ideas for Companies 9

10. Profit Extraction Planning  OMB’s – dividends continue to be more tax efficient than salary/bonuses  Personal tax rates for 2013/14  Additional rate of tax to reduce to 45% (from 50%)  Dividend rate will become 37.5% (from 47.5%); this equates to 30.55% (from 36.1%) of the net dividend 28 June 2012 Tax Planning Ideas for Companies 10

11. Profit Extraction Planning  Planning points  Need to consider timing of dividend payments  Is the income “needed”?  If so consider loans in 2012/13 which are repaid by way of dividend in 2013/14 28 June 2012 Tax Planning Ideas for Companies 11

12. Comparison: Additional Rate Taxpayer Tax/NIC Rate % BonusDividend £ Small Company £ Large Company £ Surplus profit100,000 Employers’ NIC on bonus13.8(12,127)-- Corporation tax20/23-(20,000)(23,000) Received87,87380,00077,000 Income tax/NIC47(41,300)-- Income tax on dividend30.55-(24,440)(23,524) Post tax receipt46,57355,56053,476 Effective tax rate 2013/1453.43%44.44%46.53% Effective tax rate 2012/1357.82%48.89%51.44% 28 June 2012 Tax Planning Ideas for Companies 12

13. Research and Development Tax relief Neil Norman – Corporate Tax Manager

14. 28 June 2012 14 R&D Tax Relief - Introduction Purpose of today’s talk  Provide a better understanding of R&D Tax relief  Explain the benefits of making R&D Tax relief claims  How Chiene + Tait can help Tax Planning Ideas for Companies

15. R&D Tax Relief – What is it? 15 GOVERNMENT INITIATIVE ONLY 15% OF QUALIFYING COMPANIES CLAIM... UP TO 125% ADDITIONAL TAX DEDUCTION STIMULATE GROWTH & MAKE THE UK A ‘CENTRE OF EXCELLENCE’ TAX RELIEF BY ELECTION Tax Planning Ideas for Companies 28 June 2012

16. R&D Tax Relief - Qualification 28 June 2012 16  Scientific/Technological uncertainty in any field  “No other competent professional” test  Claim > £10,000 of qualifying expenditure Tax Planning Ideas for Companies

17. R&D Tax Relief – SME v Large Companies SMEs  225%* deduction  11% Tax credits possible for surrender of R&D generated loss  Can claim on subcontracted R&D  Cannot receive grants or subsidies * Change in FB2012, subject to state aid approval Large  130% deduction  Tax credits not possible for loss surrender  Cannot claim on subcontracted R&D  Can receive grants or subsidies 28 June 2012 17 Tax Planning Ideas for Companies

18. R&D Tax Relief – SME v Large Companies Example: A Ltd claims £100,000 of qualifying expenditure for R&D Tax Relief. 28 June 2012 18 SMELarge ££ Qualifying expenditure100,000 R&D Tax Relief uplift (SME:125%, Large 30%) 125,00030,000 R&D Tax relief deduction (SME:11%, Large n/a) 225,000130,000 R&D Tax credits24,750 (24.75% of cost) n/a Tax Planning Ideas for Companies

19. R&D Tax Relief – Qualifying expenditure  Staff costs  Consumable items  Software  Subcontracted expenditure  Externally provided workers 28 June 2012 19 Tax Planning Ideas for Companies

20. R&D Tax Relief - New developments Finance Bill 2012 introduces:  £10,000 de minimis limit withdrawn in  Micro claims possible  Removes the restriction on PAYE/NIC for tax credit claims Finance Bill 2013 expected to introduce:  “Above the line” tax credits for large companies 28 June 2012 20 Tax Planning Ideas for Companies

21. R&D Tax Relief – C+T History  > 50 R&D Tax relief claims made to date  Worth more than £6m to our clients  No successful HMRC enquiries 28 June 2012 21 Tax Planning Ideas for Companies

22. R&D Tax Relief – C+T Services  Assess your project  Prepare report  Negotiate with HMRC 28 June 2012 22 Tax Planning Ideas for Companies

23. Patent Box Tax Relief Neil Norman – Corporate Tax Manager

24. Patent Box – What is it? 24 GOVERNMENT INITIATIVE ONLY PATENTS APPLY... 10% CORPORATION TAX RATE NEW LEGISLATION TAX RELIEF BY ELECTION Tax Planning Ideas for Companies 28 June 2012

25. Patent Box – Qualification Tests Qualifying company 25 QUALIFYING I P RIGHTS? DEVELOPMENT CONDITION? ACTIVE OWNERSHIP CONDITION? MAKE CLAIM Tax Planning Ideas for Companies 28 June 2012

26. Patent Box – Calculations 26 Total income Qualifying Income Qualifying Income Non- qualifying Income Non- qualifying Income 10% 10% Routine return Patent Profits Patent Profits 25% 25% Brand return Patent Box Profits Patent Box Profits 2013: 40% 2013: 40% Phased introduction Patent Box Profits (Taxed at 10%) Patent Box Profits (Taxed at 10%) Steps 1-3 or streaming Step 4 Step 5+6 Extra Step Tax Planning Ideas for Companies 28 June 2012

27. Patent Box – Result 27 20132014201520162017 Routine return Brand return Non – IP profits Patent Box Profits Tax Planning Ideas for Companies 28 June 2012

28. Patent Box – When to act? 28 CONSIDER IP? PATENT APPLICATION? RESTRUCTURE? PATENT BOX ELECTION? MAKE CLAIM TODAY June 2012July 2012Autumn 2012 HMRC GUIDANCE LEGISLATION ENACTED 2013 Tax Planning Ideas for Companies 28 June 2012

29. Any questions? 29 Tax Planning Ideas for Companies 28 June 2012