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Here’s an audio summary of 10 key benefits of the UK R&D tax credits government tax incentive from our R&D Tax Credits podcast.
Podcast (rd-tax-credits): Play in new window | Download | Embed
Subscribe: RSS
Here’s an audio summary of 10 key benefits of the UK R&D tax credits government tax incentive from our R&D Tax Credits podcast.
Podcast: Play in new window | Download | Embed
Subscribe: RSS
Here’s a round up of some recent financial & tax news that might be of interest – you can find an audio download version of this post below:
Calls for quarterly R&D tax relief for SMEs
In an effort to boost SME cashflow, there are calls for the Government to make the UK R&D tax incentive a quarterly rather than end of year tax relief. Currently SME companies claim R&D tax relief retrospectively. Large companies can, however, reduce (in year) quarterly instalment tax payments that they are required to make thereby securing the benefit of the relief earlier. This measure would help level the playing field. This makes sense – we’ll have to wait and see…
March Budget 2016 – Pension countdown
George ‘O’ will step up on 16 March 2016 to deliver his Budget Statement and the big news is expected to be regarding restrictions on income tax relief on pensions for higher rate tax-payers.
Action point: Consider making pension contributions in advance of the Budget date.
Patent Box changes afoot – act now
New, more stringent rules will apply to companies that elect into the Patent Box tax incentive after 30 June 2016. This follows the ‘beating’ this UK Gov tax incentive received from other EU states following its introduction in 2013 (but for how much longer in the light of a possible Brexit….?).
Action point: If you have a patent or patent pending, consider electing in before 30 June 2016.
Get ready for new dividend tax rates
From 6 April 2016, new dividend tax rates will apply that results in an almost complete shake-up of the fairly established remuneration structures for most owner-managed companies.
Action points: Run some calculations to see how you might be affected and consider paying further dividends in advance of the 5 April 2016 deadline. Note that companies that qualify for R&D tax relief might have some of the down-side offset by receiving a greater proportion of the remuneration in the form of PAYE salary / bonus and claiming enhanced R&D tax relief (dividends are not eligible).
Buy-to-let changes – traps for the unwary
I probably don’t need to tell you more about the widely publicised restrictions being placed on buy-to-let interest relief etc but watch out for the Stamp Duty Land Tax (SDLT) 3% surcharge that can bite in what might otherwise be fairly innocuous circumstances…
For example, buy a new residential house before selling old residential house = 3% ouch! You might be able to receive a refund in these circumstances but the initial additional SDLT outlay can be significant and is yet another case of a tax sledge-hammer to crack a nut!
SEIS / EIS Course Launch
By popular demand, we have set up a new course setting out in the ins-and-outs of the hugely popular (yet often misunderstood!) Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS).
These UK Government tax incentives are growing in popularity – especially with the growth of crowd-funding platforms such as Crowdcube. We have helped and continue to help 100’s of companies navigate and make the most of these tax reliefs which can be quite tricky to navigate for the uninitiated.
If you are a company founder or considering diversifying into business angel investing yourself, you should benefit from this course.
You can sign up to receive the course via email here:
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:
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 are the slides that I used to present to the Chartered Institute of Patent Attorneys (CIPA) at a seminar in Liverpool last week. The key relevant theme was the Patent Box (given the audience) but my objective was to emphasise how and where the Patent Box fits into the wider series of Government tax incentives aimed at innovative IP-rich UK companies.
From start-up we have the Seed EIS followed by EIS for tax efficient funding. Both schemes are designed to support companies undertaking R&D work and creating their own IP.
R&D tax credits then step into support companies during the development phase. The R&D tax credit relief continues to be a fantastic source of support for UK companies but up until 1 April 2013 there was a cliff-edge at the exploitation stage as there were no tax incentives there to support IP rich companies.
This where the Patent Box steps in to support companies with qualifying patents to complete the innovation business lifecycle.
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…
Image: BASF – The Chemical Company via Compfight
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.
I could probably give you 25 misconceptions that I hear on a daily basis but, for now, here are 5 common misconceptions regarding the UK R&D tax relief:
Please get in touch if you’d like to learn more – plus no doubt allow us to dispel the other 20 misconceptions…!