Other useful tax terms Business rates


Business rates are taxes paid on most non-domestic properties. These taxes contribute towards the cost of services provided to businesses by local councils.


Capital allowances Capital allowances are tax reliefs. When a company purchases or builds an item of plant or machinery that is kept for use in the business, it is allowed to deduct some or all of the value of the item from its taxable profits over a number of years, to reflect the fall in value of the asset resulting from its use.


Climate Change Levy (CCL)


Construction Industry Scheme (CIS) tax


Controlled foreign company (CFC)


CCL is an environmental tax which is charged on energy used by non-domestic customers in the UK. Its aim is to provide an incentive to increase energy efficiency and reduce carbon emissions.


In the UK, the CIS tax applies to payments made to subcontractors who carry out construction work for contractors. Under this scheme, contractors deduct money from payments made to subcontractors and pass this on to the UK Government. The deductions represent advance payments towards the subcontractor’s tax and National Insurance liabilities.


In the UK, a CFC is a foreign company which is not resident in the UK but which is controlled from the UK. The CFC tax rules aim to prevent UK profits being diverted to low tax jurisdictions. Consequently, if profits are earned through a CFC and do not meet any of the exemptions, those profits are apportioned and charged to a UK company which means the profits are subject to UK corporation tax.


Corporation tax Tax evasion Tax avoidance


Corporation tax is the main tax a company pays on its profits. In the UK, the ‘headline’ rate is currently 20% and in Ireland it is 12.5%.


Tax evasion is against the law. This is usually when a company (or person) misrepresents the true state of their financial affairs to tax authorities, for example dishonest tax reporting.


Tax avoidance is a more ambiguous term. It is not illegal and SSE interprets it as when a company or individual seeks to avoid paying tax by, for example, exploiting loopholes in the law. They would be doing so in a way that was not intended by the lawmakers, going beyond what SSE would consider to represent routine tax planning.


Tax planning


Tax planning is a responsible way of organising tax affairs, understanding that modern tax regimes are highly complex and give the taxpayer options as to how to organise their business which in turn impacts on the duty to pay tax.


Tax relief


Tax reliefs are used by governments to encourage certain behaviours from companies, particularly to encourage them to do things that have a wider benefit to the economy. For example, there are tax reliefs for research and development and for capital investment.


VAT domestic reverse charge


The VAT domestic reverse charge is a change in the UK VAT legislation which means companies no longer pay VAT to suppliers of wholesale energy. Instead, in their VAT returns, the VAT that would have been paid to suppliers is added to the total amount of VAT the companies pay to HMRC but also to the amount of VAT that they reclaim.


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