How can I reduce my company tax bill?

Here, we examine the ways firms can keep a lean tax bill like Amazon do.

Amazon has cut its company tax bill in the UK this year, instigating anger amongst business owners.

The retail and cloud computing giant’s UK arm, Amazon UK Services, paid only £1.7 million in tax this year, less than the £7.4 million from last year.

It was able to defer tax payments by paying staff in share-based payments – worth an average of £1,000 each per year.

This is despite a pre-tax profits jump of £72.3 million from £24.3 million.

Corporation tax is based on profits, not revenues, and our profits have remained low given retail is a highly competitive, low-margin business and our continued heavy investment,’ an Amazon spokesperson told The Guardian.

SMEs across the UK have bemoaned Amazon’s tax evasion, which is not illegal in the UK. Tax is a tricky subject as all SMEs want to pay their fair share of tax in the UK. But how can SME’s ensure that their own tax arrangements are as lean as possible, like Amazon’s?

How to reduce your company tax bill

One way of doing it is to claim research and development tax credits from the Government. The average R&D claim for SMEs, launched by the Government in 2000 to reward innovative UK companies, is now £61,514. However, due to low take-up, SME’s are still owed over £84 billion in unclaimed tax relief – that’s around 41 times Amazon’s total UK turnover this year. R&D can be paid in the form of a cash payment and/or a lower corporation tax bill.

Tony Mills, Director of Online Tax Rebates said,This tax credits scheme isn’t confined to a laboratory, it’s purposefully broad; everything from a new piece of software to a boundary-pushing restaurant dish is covered’.

‘Once you’ve received a nice financial boost, make sure you reinvest in more innovation, creating a never-ending loop of reward for your business.’

Related: R&D tax credits: What you need to know

Patent tax relief

There is also a Patent Box tax relief which is also available for innovative companies and comes in the form of tax relief on profits derived from patented inventions and, while complicated, is worth looking into.

‘As with R&D tax relief, most reputable firms don’t charge any fees upfront and can handle the claim from start to finish,’ says Mark Tighe, CEO, specialist tax relief firm Catax.

Employment allowance and business rates

Employers who currently pay employers’ Class 1 National Insurance could save up to £3,000 a year from their National Insurance Bill. Richard Turner, senior manager at accountancy firm, Menzies LLP, told GrowthBusiness, even if the claims process wasn’t completely straightforward.

‘Claiming employment allowance does have some quirks,’ he said. ‘For example, if individuals own a group of companies, employment allowance can only be claimed by one business, or spread between the group, up to the maximum value of £3,000.’

Business rates relief is available to small businesses who own a single property with a rateable value of up to £15,000 and in many cases, can reduce business rates payments to nil. The scope of business rates reliefs is quite broad and there are different schemes for individual types of businesses, for example, pubs.

He added, ‘As a business grows, it may be wiser to take on the services of an accountant or third party adviser who would be better placed to identify and apply for any types of tax relief which could have been missed before.’

See more:

The five countries in Europe with the lowest corporation tax

What your business can do with a tax rebate

The state of R&D tax credits and how they can help growth companies

Michael Somerville

Michael Somerville

Michael was senior reporter for from 2018 to 2019.

Related Topics

R&D tax credits