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Limited Company

Corporation Tax Strategies

It is good to know certain rules and basics about deductible expenditure and losses for corporation tax.


Trading Losses


Trading losses up to 5 years ago can be carried forward and subtracted from future tax bills for the company.

Non-trading losses – i.e. spend (excluding capital spend) the company has incurred in preparation for trading can also be carried forward if an election is made with HMRC for them to be treated as trading losses.


Capital allowances


Capital allowances can be claimed on plant and machinery, fixtures and fittings, certain property renovations and holiday lettings. Also, allowances can be claimed on certain buildings – Industrial Building Allowance.


Annual Investment Allowances


The full cost of new items of plant and machinery (excluding cars) can be claimed in the year of purchase. This is currently up to a total of £500,000, to drop to £200,000 in April, 2016.


Writing – down allowance


After you have used up the Annual Investment Allowance, you claim writing down allowances each year – 18% per year for most items, and 8% for some items, such as company cars with high CO2 emission rates.


First – year allowance


Some items qualify for full cost allowance, after the AIA has been used. These items include:


  • some cars with low CO2 emissions

  • energy saving equipment that’s on the energy technology product list, eg certain motors

  • water saving equipment that’s on the water efficient technologies product list, eg meters, efficient toilets and taps

  • plant and machinery for gas refuelling stations, eg storage tanks, pumps

  • gas, biogas and hydrogen refuelling equipment

  • new zero-emission goods vehicles


Industrial building allowance


IBA is given on qualifying expenditure. They are writing down allowances CA34500 and initial allowances CA34000.

The annual rate of WDA for a person who constructs an industrial building or buys it unused is 4% of the qualifying expenditure (the construction costs or purchase price) unless the building qualifies for the special rates of IBA for buildings in enterprise zones. For those buildings the annual rate of WDA is 25%.


The rate of initial allowance is 100% for buildings that qualify for the special rates of IBA for buildings in enterprise zones CA37000.


Normally, there is no initial allowance available on industrial buildings outside enterprise zones.

Industrial buildings include:


  • a building that is in use for the purposes of a qualifying trade CA32200,

  • a qualifying hotel CA32400,

  • a qualifying sports pavilion CA32500, or

  • in enterprise zone cases a commercial building CA37000


Examples of qualifying trade include:


  • Manufacturing

  • Television and radio companies

  • Garages and vehicle repair workshops

  • Storage

  • Agriculture



Research and development relief


  • The Small and Medium-sized Enterprise Scheme


This scheme has higher rates of relief. From 1 April 2015, the tax relief on allowable R&D costs is 230% – that is, for each £100 of qualifying costs, your company or organisation could have the income on which Corporation Tax is paid reduced by an additional £130 on top of the £100 spent. It also includes a payable credit in some circumstances.

You can only claim under the scheme for SMEs if your company or organisation meets the definition of a SME for R&D Relief purposes.


The criteria for claiming R&D relief are very strict. Your company or organisation can only claim for R&D Relief if an R&D project seeks toachieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty – and not simply an advance in its own state of knowledge or capability.



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