The R&D tax relief is aimed at entities that are registered for UK corporation tax, so primarily UK companies.
The relief itself is administered through the company corporation tax filing regime.
Despite these benefits, it is surprising how many companies continue to overlook this government tax incentive and potentially miss out.
With this in mind, we have recently set up a new course on the UK R&D tax relief that might prove to be a useful primer for founders or entrepreneurs who would like to learn more about this attractive UK tax incentive and how you might benefit.
You can subscribe below:
The UK Research and Development (R&D) Tax Relief Scheme is delivered via HMRC’s corporation tax filing system.
After each financial accounting period, a company is required to prepare statutory accounts along with a corporation tax computation.
The corporation tax computation calculates the tax liability of the company for the period (if profitable) based on the statutory accounts. If pre-revenue and / or in development mode then the corporation tax computation will calculate the company’s losses for the period.
The R&D tax claim figure is entered into the corporation tax computation and CT600 corporation tax return to claim the notional enhanced R&D tax deduction.
The corporation tax return and supporting computation is filed online with HMRC. It is recommended that the company also prepares a report outlining the nature of the R&D work and why / how it satisfies the HMRC definition of qualifying R&D plus detailed supporting claim calculations – or you could get an R&D tax specialist to help :)
If profitable, this will result in a reduction in the corporation tax payable.
If loss-making, the company can elect to surrender the enhanced tax loss for a tax credit payment from HMRC. Or it could elect to carry the enhanced tax loss back twelve months (if profitable) or carry forward to utilise in future periods.
HMRC aims for a 28 day turnaround time in reviewing and processing R&D tax claims.
If you would like to learn more, why not subscribe for our R&D Tax Relief Training Course:
It has been a busy week at ip tax solutions with three R&D tax credit claims securing a total of over £400,000 of R&D tax credits landing in just one week!
The successful companies are all technology companies building new software platforms based from Manchester to London. The claims were agreed within 28 days without query by HM Revenue & Customs. This continues ip tax solutions’ 100% success record.
One of the claims (worth £126,000) was the result of a chance 10 minute discussion with the CEO – he had wrongly assumed that the company’s activities and structure meant that it would not qualify for SME R&D tax relief. I helped explain how the relief could apply based on their facts. With just one week to go until the deadline for making the claim elapsed, we pulled together a robust technical report and calculations and filed the claim with HMRC on time.
The company was thrilled to receive over £100k cash in less than a month!
The other two tech companies each received £175,000 and £107,000 respectively wired directly to their bank accounts within 30 days (#happyclients).
Don’t risk missing out on your R&D tax credit claim – a 10-15 minute conversation might be all it takes to help assess your eligibility for a claim and with average claims of over £100,000 for this week’s successful claimants it would be a shame to miss out…!
The UK R&D tax credit incentive scheme continues to get better and better (have I said this before!?!)
From 1 April 2015, SMEs attract an uplift on their qualifying R&D expenditure of 230% (up from 225%). This means that in cash terms the tax credit is now worth 33.35%!
So 1/3rd of your expenditure on staff carrying out R&D project work could effectively be subsidised by this generous UK tax incentive – that’s up from c25% just over a year ago.
If you’ve yet to take a look at this incentive – especially if you are a developer, digital agency, creative or engineer or manufacturer – I urge you to do so. You can always get some help from some friendly folk who are R&D tax specialists :)
Here is a short summary of the key changes related to the UK R&D tax credit incentive as announced in the March 2015 Budget statement.
I’ve been getting some questions about the new 14.5% R&D tax credit rate announced in the March 2014 Budget Statement and how it works in practise.
So here’s a short video outlining how the effective rate of cash receivable from HMRC increases from 24.75% to 33% on qualifying spend – that’s one third of your R&D expenditure effectively being funded by the Government!
Plus how it could result in approx £8,000 of additional cash in your bank account for each £100,000 of qualifying spend if your SME is loss-making during its R&D phase.
Please leave your comments or feedback below or get in touch.
Picture the scenario: a new technology startup. The founders invested £250,000 into the development of some new technology. The company is burning through the cash at a rate of knots and so they’re looking forward to recouping a chunk of it by claiming R&D tax credits under the ‘R&D tax credit scheme’ – something they’d heard about somewhere not long ago… In their minds, the tax credit had already been ear-marked for the next phase of work.
But two HUGE (yet surprisingly common) issues were about to put a hole through the R&D tax claim:
Of course, we should not lose sight of the fundamental issue of whether the company’s activities qualify for R&D tax purposes in the first place? If so, the company could still get a good result overall (a significant enhanced loss carried forward in the 31 March 2012 period end to offset against future trading profits and a potential repayable tax credit on qualifying activities and costs incurred in its next period ended 31 March 2013 and onwards) – just not perhaps as good as the founders had understood from the outset.
Fortunately, given the relaxation in the rules for accounting periods ending after 31 March 2012, the PAYE cap is no longer a problem – although it can still bite for retrospective claims (which can be made until 31 March 2014).
This is often a problem with tax incentives – there are almost always traps for the unwary…
Statistics from HM Revenue & Customs suggest that less than 0.25% of UK companies are taking advantage of this fantastic Government incentive which can apply to all companies across all sectors.
The R&D tax credit scheme has been in existence since 2000 and the tax relief available has got better and better year on year.
It is important that you investigate the potential for your company to make a claim – you could seek some professional specialist R&D advice here.