24th Nov 2021

Building a Tax Efficient Business: Capital Allowances and Employee Benefits

Steven Robinson picture

Steven Robinson


Welcome back to our blog series on tax efficiency!

In the last blog, Steven shared a bit about himself, and shared tips on how business directors in particular can create tax efficiencies that work toward their goals and passions – Steven’s life goals are based around food and travel!

In this blog Steven talks about what he’s doing for the team here at Blu Sky and gives more insight into how we’re making a tax efficient business in other ways.

Over to you Steven!

Capital Allowances – A tax efficient way to invest in business

Well, investment is the big one here. It feels like we are constantly investing in the business. Integrating new systems like the latest practice management software, online accounting software, pricing software, new equipment for the team and tax consultancy software. We’re investing into the business and the long-term value, whilst reducing the tax bill.

With all the investing in new equipment, comes the Capital Allowances Super Deduction. This tax relief allows a business to offset the cost of the asset investment against taxable profits up to a maximum of £1m, reducing tax whilst adding to the value of the business.

But with the Super Deduction, a limited company can claim 130% for that investment if it is a new purchase – and there is no cap on the investment that qualifies. If you are in need of new equipment, now could be the time to invest.

The tax on company cars has increased to the point where it’s not usually financially viable for the company, or the user of the car, apart from if you opt for an electric car!

This could be an option for Blu Sky as well as other business owners out there as if the business buys the car, 100% corporation tax relief is available in the year of purchase.

With electric vehicles there are other side benefits worth considering also – Tax-free charging at the workplace, tax-free accessories and zero to pay in road taxes. Electric cars get taxed at 1% currently, rising to 2% soon.

Cycle to Work Scheme

So, I’ve recently started getting into cycling and I’ve bought a hybrid during lockdown. At the moment I’m trying to get out twice a week. But I’ve set myself a couple of targets of doing 100K in one day and getting involved in the Great North Bike Ride next year! The cycle to work scheme benefits the full team!

Through the cycle to work scheme, bikes and equipment can be purchased under a ‘salary sacrifice scheme so that the cost of that bike or equipment comes out of pay before being taxed.

Not everyone realises that this is something you can maximise and use every year! It includes equipment not just bikes and it’s not capped anymore. I’ve not managed to rope anyone else in to do the Great North Bike Ride just yet, but there’s still time!

Trivial Benefits

Then there are trivial benefits. Trivial benefits are a great tax-efficient way to take value from your business up to the value of £50, to a maximum of £300 total in a year. It’s £300 of tax free-money a year which you can have a chosen spend for, like vouchers (it can’t be cash) for treats.

Unlike Directors, there is no £300 limit for employees, so we often utilise these with the team. When you want to say thanks to someone, a £50 voucher or gift up to that value, can often mean more than a bit of cash! It’s worth noting that the reward can’t be for employee performance.

Once in a while, we like to go for a nice lunch as a team! Provided all staff are offered the option, providing lunches to staff at the business premises is tax-free for the employees, and the business can claim corporation tax relief and recover VAT (where relevant) on the costs.

Want to learn more? Need help becoming tax efficient?

The Tax Insights Diagnostic service reviews and highlights tax advice and tax-saving opportunities, along with anything else that’s applicable for business owners. If you’d like to learn more, don’t hesitate to get in touch!