UK small and medium enterprises are leaving substantial sums unclaimed each year by overlooking tax reliefs they are legally entitled to access. These opportunities can significantly reduce tax burdens and improve cash flow positions, yet remain underutilised due to limited awareness or perceived administrative complexity.
The following five tax reliefs represent the most commonly missed opportunities for UK SMEs, along with practical guidance on claiming procedures.
1. Small Business Rate Relief
Small Business Rate Relief provides one of the most substantial savings opportunities for qualifying enterprises. Properties with rateable values below £15,000 qualify for this relief, provided the business operates from a single property.
Eligibility Criteria
- Main property rateable value must be £12,000 or below for 100% relief
- Properties valued between £12,001-£15,000 receive tapered relief
- Additional properties permitted if rateable value remains below £2,899 each
- Combined rateable value across all properties must stay under £20,000 (£28,000 in London)
Relief Rates
Properties £12,000 and below: 100% relief (zero business rates payable)
Properties £12,001-£15,000: Gradual reduction from 100% to 0% relief
Claiming Process
Contact your local council's business rates department directly to submit an application. Required documentation includes:
- Business registration details
- Property rateable value confirmation
- Details of any additional properties operated
- Proof of business occupation
When acquiring a second qualifying property, existing relief on the main property continues for 12 months, providing transitional support.
2. Research & Development Tax Credits
R&D tax relief offers substantial benefits for businesses engaging in innovative activities, including product development, process improvements, or technological advancement.
SME Scheme Benefits
Qualifying SMEs can claim:
- Additional 130% deduction of R&D costs from taxable profits
- For every £100 of qualifying R&D expenditure, £230 can be deducted when calculating taxable profits
- Payable tax credit of 14.5% where R&D costs create or increase losses
SME Qualification Thresholds
Businesses qualify as SMEs when meeting these criteria:
- Fewer than 500 employees
- Annual turnover below €100 million
- Balance sheet total under €86 million
Qualifying Expenditure Categories
Staff costs: Wages and salaries for employees directly engaged in R&D activities
Utilities: Power, water, and fuel costs attributable to R&D work
Software: Computer software used directly in R&D projects
Consumables: Materials consumed or transformed during R&D processes
Subcontractor costs: 65% of payments to external R&D providers
Clinical trial volunteers: Fees paid to participants in qualifying medical trials
Claiming Procedure
Submit claims through the standard CT600 company tax return. When claiming repayable tax credits, complete supplementary form CT600L alongside the main return.
Maintain detailed records of:
- R&D project descriptions and objectives
- Staff time allocation to R&D activities
- Direct costs incurred for each qualifying project
- Technical challenges addressed and solutions developed
3. Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS)
While SEIS and EIS do not directly reduce company tax liabilities, these schemes provide powerful investment attraction tools by offering substantial tax benefits to potential investors.
SEIS Investor Benefits
- 50% income tax relief on investments up to £100,000 annually
- Capital gains tax exemption on qualifying disposals
- Capital gains tax deferral when reinvesting gains into SEIS shares
EIS Investor Benefits
- 30% income tax relief on investments up to £1 million annually
- Capital gains tax exemption after three-year holding period
- Loss relief against income tax when qualifying investments fail
Application Requirements
SEIS eligibility:
- Company gross assets under £200,000 when shares issued
- Fewer than 25 full-time employees
- No previous trade activity
- Qualifying trade activity only
EIS eligibility:
- Company gross assets under £15 million before investment, £16 million after
- Fewer than 250 full-time employees
- Unquoted company status maintained
- No substantial interest held by investors (over 30%)
Claiming Process
Apply to HMRC for advance assurance before seeking investment. Submit form EIS1 for advance assurance applications, providing:
- Business plan details
- Financial projections
- Proposed use of funds
- Company structure information
Following successful investment rounds, issue EIS3 or SEIS3 certificates to investors, enabling them to claim their respective tax reliefs.
4. Marginal Rate Relief for Corporation Tax
Marginal Rate Relief applies to companies with taxable profits between £50,000 and £250,000 from 1 April 2023 onwards, providing graduated tax rates between the small profits rate and main rate.
Rate Structure
Profits up to £50,000: 19% corporation tax rate (small profits rate)
Profits £50,001-£249,999: Marginal rate between 19%-25%
Profits £250,000 and above: 25% corporation tax rate (main rate)
Marginal Rate Calculation
The marginal rate increases gradually as profits rise within the £50,000-£250,000 band. The relief reduces the additional tax burden compared to applying the full 25% rate across all profits in this range.
Associated Companies Impact
Where associated companies exist, profit thresholds are divided by the total number of associated companies plus one. This division affects:
- Small profits rate threshold (£50,000 ÷ number of associated companies + 1)
- Main rate threshold (£250,000 ÷ number of associated companies + 1)
Claiming Procedure
Marginal Rate Relief applies automatically when completing corporation tax returns for qualifying profit levels. No separate application is required.
Ensure accurate profit reporting through:
- Proper income recognition timing
- Appropriate expense allocation
- Correct treatment of capital vs revenue items
- Accurate depreciation calculations
5. Home Office Expenses
Business owners operating from home can claim proportionate household expenses as legitimate business deductions, yet many fail to capture these available savings.
Qualifying Expenses
Fixed costs (claimed proportionately):
- Rent or mortgage interest payments
- Council tax
- Buildings insurance
- Utility bills (gas, electricity, water)
- Internet and telephone costs
Variable costs (claimed fully if business-related):
- Business telephone calls
- Dedicated business internet connections
- Office supplies and equipment
- Business insurance policies
Calculation Methods
Proportionate method: Calculate the percentage of home used exclusively for business purposes. Multiply qualifying household expenses by this percentage.
Simplified method: HMRC allows a flat rate deduction based on hours worked from home:
- 25-50 hours per month: £10 monthly allowance
- 51-100 hours per month: £18 monthly allowance
- 101+ hours per month: £26 monthly allowance
Claiming Requirements
Record-keeping obligations:
- Detailed home office usage logs
- Receipts for all household expenses
- Floor plans showing business use areas
- Documentation of exclusive business use
Exclusive use criteria: Claimed areas must be used solely for business purposes. Mixed-use rooms require careful apportionment between business and personal use.
Submission Process
Include home office expenses in annual accounts under appropriate expense categories. Maintain supporting documentation for potential HMRC enquiries.
For sole traders, claim through self-assessment tax returns using relevant expense sections. Limited companies include expenses in corporation tax computations as allowable business costs.
Maximising Tax Relief Claims
Professional advice ensures optimal use of available reliefs and compliance with claiming requirements. Many businesses benefit from systematic reviews of potential relief opportunities, particularly when circumstances change or new schemes become available.
Regular consultation with qualified accountants helps identify emerging opportunities and ensures claims are submitted correctly and promptly. Don't hesitate to get in touch with professional advisers to discuss your specific circumstances and potential relief entitlements.