WellTax Blog

Exploring Tax Incentives for Investments: A Look at Companies and Individuals

April 19, 2023

Governments often use tax incentives as a tool to stimulate investment by reducing the tax obligations of companies and individuals. These incentives can come in various forms, such as tax credits, deductions, exemptions and lower tax rates.

For companies, one available tax incentive is the investment tax credit. This incentive enables businesses to deduct a portion of their investment expenses from their taxes. As a result, companies have more funds available to invest in their business, increase sales and contribute to the economy.

In the UK, between 1 April 2021 and 31 March 2023, companies that invested in qualifying new plant and machinery assets can claim a 130% super-deduction capital allowance on qualifying plant and machinery investments and a 50% first-year allowance for qualifying special rate assets. This super-deduction allows companies to reduce their tax bill by up to 25p for every £1 they invest.

For individuals, there are several tax reliefs available for those who invest in specific companies, social enterprises or Venture Capital Trusts (VCTs). These reliefs include income tax relief on investments in qualifying companies or VCTs, capital gains tax relief on any profits made on the investment and capital gains tax relief when reinvesting a previous gain in a scheme.

In the UK, individuals can invest directly in a qualifying company or enterprise using a venture capital scheme if they meet the investor conditions. The company must also meet the scheme conditions. The available schemes include the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) and Social Investment Tax Relief (SITR).

In summary, there are various tax incentives available to both companies and individuals to encourage investment. These incentives can provide significant tax savings and help drive economic growth.

Domenico Santomasi

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