Tax Exemption for Start-ups in USA & UK
After a series of economic downfalls in the recent past, the global economy has learned to adapt to the changing environment. With a number of start-ups and innovative business models, all major countries are now witnessing a disruptive economic growth. The United States and the United Kingdom are two of the strongest economies in the world. By making room for entrepreneurial ventures in their market, these countries have started a worldwide wave of start-ups.But starting a new business is not as easy as it sounds. From arranging capital, to establishing clientele, an entrepreneur goes through a tough path before the business becomes profitable. Despite this, all businesses, big or small, are subjected to taxes as they involve selling of goods and/or services. In such a scenario, keeping up with a series of imposed taxes can be a little daunting.This is why economic leaders like the USA and UK offer a variety of tax exemption plans for start-ups. These exemptions not only help relieve the financial burden from the budding businesses, but also give them opportunities to develop better products and offerings for the people. Various countries have different plans and reforms in place to provide tax assistance to entrepreneurs. This article focuses on major tax relief policies followed by the USA and UK to support and promote start-ups registered in these countries.
Tax Exemption for Start-ups in UK
Over the years, the UK government has been focussing on building strong research and development infrastructure. To promote extensive research for product ideation and development, the government offers up to 230% relief in corporation tax to start-ups and small to medium businesses.What does this mean?This tax exemption comes on research and development cost incurred by the companies. It means that for every £100 spent by a start-up on their R&D projects, the government offers the companies to reduce its taxable profit by an additional £130. The end result is a £230 exemption in Income tax return for £100 spent on research and development by start-ups. This potentially wipes out the company’s entire payable corporation tax.Who can avail this exemption?In order to be granted this exemption in corporation tax, the company must be an SME registered in the UK. According to the government’s policies, SMEs are defined as companies which have less than 500 employees, and have annual turnover less than €100m). The company also needs to spend a minimum amount of £10,000 on research and development projects every year to be given the exemption.
Tax Exemption in the USA
What makes the US taxation policy different from other countries is that the country does not have a Value Added Tax (VAT) policy. The federal government collects revenue in the form of Sales and Use Tax from all corporations, big and small alike. To enable start-ups and promote entrepreneurs, the government has rolled out a series of initiatives that offer tax exemptions and reliefs.The Federal R&D Tax Credit is one such initiative by Internal Revenue Services (IRS) that is aimed at stimulating economic growth and research. It is an activity based credit that offers start-ups and small businesses a relief by partnering with R&D. This program offsets the companies’ Alternative Minimum Tax, and incentivizes investments in the USA. The Tax Credit scheme was introduced to help start-ups who lacked federal income liability tax resources, and could not monetize their credits.Apart from this, there are many other organizations and policies which help your business find the right help with tax relief. StartupNY, a New York based initiatives assists entrepreneurs get 10 year tax exemptions for their business.So now that you know about ways to get tax benefits for your start-up in USA and UK, why not start the business you’ve been thinking about for a long time? The time is right, and there are more resources available to help you than ever. Read “9 Business Ideas Aspiring Entrepreneurs Must Consider in 2018” on The Mogul Mom. This blog talks about some trending and profitable business ventures you can choose to pursue.Budding women entrepreneurs who are considering to, or have already started a business should read “Five Tips for Women Launching Their Dream Business”. The blog post will not only give you a motivating boost, but will also equip you with important things that you should know on your journey to success.