Corporation Tax Reliefs for UK Companies

With the introduction of the associated companies regime, many UK companies have found themselves facing increased Corporation Tax liabilities. While this shift presents a challenge for business owners, there are still numerous planning opportunities available. A wide range of tax reliefs remain in place to help mitigate profits chargeable to Corporation Tax — many of which are either commonly underutilised or not widely known.

Understanding and applying these reliefs correctly can lead to significant tax savings and improved cash flow, enabling companies to reinvest and grow. Below is an overview of some of the key reliefs available to UK companies, including both commonly claimed and more specialised options.

1. Capital Allowances

One of the most common and well-established reliefs is capital allowances. When a company incurs capital expenditure, it generally cannot deduct the cost in its tax computation. Instead, tax relief is provided through capital allowances.

Key types of capital allowances include:

• Annual Investment Allowance (AIA): Provides 100% deduction for qualifying expenditure up to £1 million per year.

• Writing Down Allowance (WDA): Applies annually to qualifying expenditure not covered by AIA. The rate is either 18% or 6%, depending on the asset type.

• Full Expensing (100%): A first-year allowance available to companies that invest in qualifying plant and machinery.

  
  

2. Research and Development (R&D) Relief

This valuable but commonly misunderstood relief encourages companies to invest in innovation, whether through product development or improving intellectual property.

A ‘Headline Rate’ of 20% (= post tax rate between 15% or 16.2%) is available; for loss-making companies, a cash credit (subsidy) is available at a rate of between 15%-16.2%.

3. Group Relief

Companies within a group structure can surrender losses to other profit-making group members, potentially reducing the overall Corporation Tax liability of the group. Strict rules apply.

Consortium-owned companies can also take advantage of the Group Relief regime.

4. Creative Sector Tax Reliefs

Specialist reliefs are available for companies operating in the creative sectors, including film, TV, animation, video games, and theatre. These reliefs are designed to support and promote investment in UK cultural production.

5. Rollover Relief

Where a company sells a business asset and reinvests the proceeds in another qualifying business asset, any gain arising on the disposal can be deferred. The gain becomes chargeable only when the new asset is sold or ceases to be used in the trade.

6. Substantial Shareholding Exemption (SSE)

A parent company selling shares in a trading subsidiary may be exempt from Capital Gains Tax under the SSE, provided certain conditions are met — resulting in no taxable gain on disposal.

7. Terminal Loss Relief

If a company ceases trading, trading losses incurred in the final 12 months can be carried back and offset against profits from the previous three years. This can lead to a repayment of Corporation Tax previously paid.

8. Land Remediation Relief

Available to developers or investors who incur costs to clean up contaminated or derelict land (including asbestos removal). An enhanced deduction of 150% of qualifying costs is available, offering a generous incentive for land regeneration.

Speak to an Expert

If you'd like to learn more about any of the reliefs discussed above and how they could help your business reduce its tax liability, please don’t hesitate to get in touch. We would be delighted to assist you.

Authored by: London Tax Team