Small businesses in the West Midlands are missing out on ways to save tax and increase their profitability, according to a Birmingham tax expert.
Simon Littlejohns, tax partner at accountants and business advisers PKF, said many tax reliefs and Government-approved tax saving schemes were being overlooked by small businesses and their investors.
Mr Littlejohns said the Enterprise Management Incentive Scheme (EMI), the Enterprise Investment Scheme (EIS) and Enhanced Capital Allowances were three examples of schemes that could enhance a small businesses investment potential.
"It seems wasteful at best not to make the most of them," Mr Littlejohns said.
EMI allows trading companies with assets below £30 million to grant options over shares worth up to £100,000.
Employees should then pay no income tax on the options and, provided that the price the employees pay for the shares is no less than the shares' market value when granted, and they do not sell their shares for at least two years, employees should ultimately pay tax at no more than ten per cent on the growth in share value.
In addition, the company may claim a tax deduction when the options are exercised.
EIS is for riskier small companies and is a long-standing Governmentapproved tax incentive for entrepreneurial investors.
Investors, whose company manages to keep within the strict rules to qualify for the scheme, benefit from attractive tax relief in respect of a subscription for new shares in the company.
If the company does badly and it becomes necessary to sell the shares at a loss, the investor may set the loss - net of tax relief already received - against their taxable income for the year. With enhanced capital allowances businesses which qualify as "small" can claim a first year allowance of 50 per cent on the purchase of plant and machinery.
And those which qualify as "medium-sized" may claim at 40 per cent.
Mr Littlejohns said: "Businesses, large or small, which invest in environmentally-friendly assets can do even better.
"Capital expenditure in three categories of environmentally friendly expenditure, namely energy-saving plant and machinery, low-emission cars and gas refuelling equipment qualify for first year allowances at 100 per cent.
"The message is that wholly legitimate, Government-sponsored tax saving opportunities do exist, without affecting the bottom line.
"But you must ensure that you have been very careful to meet the demanding criteria to claim these opportunities."