Tax relief is a way of reducing tax liability through allowable deductions by HMRC like pension contribution, charitable donation, and allowance in first year of capital items of land, building and machinery. Through tax relief, amount of tax liability is reduce and this relief is in fact Support from HMRC to taxpayer, business and individual, to reduce their tax expense. Among these allowable tax reliefs, relief on purchase of Property, plant and equipment is a temporary incentive allowed in the year of purchase. Tax relief is also given on expenses that are incurred for disaster management and environmental protection concerns, for example expense incurred to promote “green house” affect.
Capital allowances given by Taxation authorities are another term for tax relief. These capital allowances levied on : Purchase of long term assets, asset which disposed in 8 years after acquisition, capital investments, Purchase or construction of industrial building involving heavy capital injection. Capital Allowances are also applied on “research and Development” if they qualify the conditions imposed by HMRC. Business renovation and expenses incurred on converting unused land into housing product also qualify for Capital Allowance.
Going further toward environmental protection as well as social and economical welfare, expenses incurred on cleaning and developing the contaminated land and site also invites for capital allowance claim.
HMRC also promote trade of business and provide them cushion on expenses incurred to promote the trade and business expansion. Claim for tax relief is made by matching the revenue with relevant expenditures. The criteria for qualifying expenditure is primarily dependent on taxation rules that may go according to the accounting rule if all documentary proof of these expenditures can be traced with evidence. The qualifying expenditure for revenue tax relief, RTR is “those repair and maintenance expenses which has been capitalized in books of accounts”.
Tax consultants play a major role in organizing your tax liability, and making you eligible for claiming Tax relief. First of all, in order to fulfill your legal duty you will hire the tax expert in order to cope with the tax regulations. Qualified tax professional will guide you about the correct compilation of business tax documents. As a supplement to their service, you will be directed about allowable expenditures that qualify for Tax relief. Certain expenses will be highlighted as your tax relief source, you might have paid interest on loan , a charity will be regularly sent a donation for welfare on mankind. Tax consultant will notify these expenses and makr them as tax relief. He will see through expense list and will mark those, which you may have incurred for renovation of your land, you will be counseled about how you can get the capital allowance at the time you are planning investment of capital amount. With respect to acquiring asset, tax consultant will claim tax relief for you. That will be a percentage of the cost of property, plant and equipment. Pension expense that is part of your pay roll of your business is eligible for tax relief as per taxation rules.
This article will definitely help you getting understanding about what the tax relief is, which categories it does fall in and as the application how can you use this as a guide to reduce your tax liability from now.