Tax Credits For Startups Explained

Looking to improve your startup’s finances? Tax credits could be the perfect way of doing so.

Many startups struggle with financial certainty. Whether it’s due to vital equipment breaking down, a crucial customer leaving or an unexpected opportunity arising.

Tax credits can be a blessing in these situations, helping startups to reduce their tax burden. And with Adsum’s assistance, we can advance these savings to you near-instantaneously.

However, knowing which tax credit to apply for and their requirements can be something of a minefield. Fortunately, startup tax relief is our specialty, and we’re here to help you make the right decisions.

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“Adsum identified our VAT requirement by simply syncing into our accounting and banking systems. This freed up to £1.25 million of cash flow which we were able to reinvest towards developing our subscription app service. This certainly gives us an edge over other players in the market because removing the lag between our expenses and HMRC paying makes a world of a difference.”

Peter Phillips, CFO of Onto
How we helped a fast-growing venture capital-backed car subscription business

What are tax credits for startups?

Tax credits are essentially subsidies that enable businesses to deduct money from the taxes they owe.

In some cases, these have been introduced by the government to incentivise particular actions, like developing new products or services or launching a certain kind of business.

As such, tax credits are a common form of startup tax incentive considering they are typically claimed by up-and-coming businesses seeking growth.

What tax credits can startups access?

Which tax credits your startup is eligible for depends on what type of business it is and what projects you’re undertaking. Adsum specialises in InstantVAT Refunds as well as Creative Industry Tax Credits for startups. We can offer you a pre-approved credit limit to the value of your tax credits, which you can drawdown anytime, to help you get financial certainty.

What tax credits can startups access?

InstantVAT Refunds

Say goodbye to waiting for VAT refunds. With InstantVAT Refunds, you get the money you're owed upto 75% faster. Put your company in the fast lane and bypass other UK businesses in the HMRC queues.

VAT Advances

What tax credits can startups access?

Creative Tax Credits

Creative Industry Tax Credits are offered to startups within eight different qualifying creative industries, including everything from video games and film, to television and theatre.

Creative Industry Tax Credits

How much are tax credits worth?

InstantVAT Refunds

How much InstantVAT Refunds are worth depends on what you’re eligible to reclaim from previous and upcoming business expenses.

Creative Industry Tax Credits

Creative industry startups can claim an additional deduction to reduce their profits or to increase a loss. This will reduce the amount of any corporation tax they will need to pay, and will be the lower of:

80% of total core costs.
The amount of UK and/or EEA core expenditure.

Navigating obtaining startup tax relief can be tricky, but with Adsum’s help, you needn’t fret.

We can help you work out which types of tax credits you’re eligible for and offer you a pre-approved credit limit to the value of those tax credits, which you can drawdown immediately once your returns are submitted to HMRC. If you are eligible for VAT refunds, we will refund you instantly.

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What people ask us about tax relief for startups

Do all startups pay UK tax?

All UK businesses must pay income or corporation tax on their net profits, which is the actual profit before working costs are taken into account. While other types of business taxes include VAT, national insurance and capital gains tax. The type and amount of tax organisations pay depends on the kind of business, its revenues and its legal status. So, in addition to spending on things like premises, staff, marketing and equipment, taxes are a massive expenditure for new businesses. By relying on tax credits, startups can give themselves more money to play with.

What tax exemptions are there for startups?

Allowances enable startups to deduct the costs of running a business from their profits before tax when preparing their annual accounts. For example, capital allowances let startups deduct the costs of equipment, machinery and business vehicles. While self-employed businesses can deduct various business expenses from their taxes. However, companies only see the financial benefits of allowances at the end of the tax year, unlike tax credits, which Adsum can advance to you at any time.

What tax benefits are there for startups?

Startups can take advantage of a range of tax benefits, including everything from claiming back pre-trading expenses to using the Patent Box scheme to pay reduced corporation tax. Again though, you may not necessarily be able to get your hands on this money until the end of the tax year, which is why Adsum’s tax credit advancement service is so useful.