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Tax Relief / Credit for R&D expenditure in the UK
We strongly suggest that you contact the HMRC
direct.
They have a strong team and are willing to help.
They will gladly visit and discuss.
Contact direct :
Tel
0161 288 6118 This branch covers the North of England.
Visit there
website for other areas.
http://www.hmrc.gov.uk/randd/special-units.htm
The R&D tax credit is available for any R&D expenditure
invested on or after 1 April 2000. For SMEs*, this means that, when
working out their profits for tax purposes, they can now increase the
amount they deduct for qualifying R&D spending from 100% to 150%.
Those SMEs that do not make a profit can surrender their qualifying
R&D losses in return for a cash payment, equivalent to £24 for every
£100 spent.
What companies are eligible? Eligible expenditure must be
company expenditure —not that of an individual or partnership — and
the qualifying spend must not be less than £25,000 a year (pro rata if
the accounting period is more or less than 12 months).
The R&D can be carried out anywhere, and can be sub-contracted. The
kind of expenditure that qualifies can include the costs of employing
staff actively engaged in research and development activities, as well as
the costs of materials for R&D.
The SME must be entitled to ownership rights and any intellectual
property arising from the R&D, but cannot claim credit on any R&D
funded by another person, or funded — even in part — by Govenment aid.
What is qualifying R&D? Guidelines issued by the Secretary
of State for Trade and Industry, developed by the DTI and Inland Revenue,
can be downloaded from
http://www.dti.gov.uk/innovation/randd/randd-tax-credits/page11350.html
Eligible R&D activities must be innovative —work that breaks new
ground or aims to resolve technological or scientific uncertainties. This
work can range from ‘blue skies’ research in purely theoretical areas,
.to applied research and experimental development directed towards a
practical aim or product.
A Real Working Example Chevin is a West Yorkshire-based IT
company, which produces software to improve the performance and cost
effectiveness of complex distributed networks. Chevin constantly looks at
ways to improve software efficiency and make it less of a load on existing
networks.
Finance Director Sharron Amold says she always assumed her company wasn’t
eligible for the R&D tax credit. “I thought the credit wasn’t in
line with the work Chevin did,” she explains. “One of our venture
capitalist funders suggested I investigate it, so I looked it up on the
Inland Revenue web site.”
Sharron’s research proved fruitful: Chevin claimed just under
£75,000 in R&D expenditure over two years, significant expenditure
for a company with 24 staff.
“It’s so worth thinking outside the typical stereotypes one might
have when considering whether your company is eligible. Chevin is just a
small company; we’re based in a market town, not near any large
university.
“It is clearly not the case that the R&D tax credit is only
available for academic research, as we’ve proved.
“The tax credit allows better planning for the future. It gives us
the confidence to continue devoting a significant amount of staff time to
researching and improving our products. We can improve our service to
customers and, in turn, sell more.”
Sharron says this credit is available to all industries and she would
encourage any company that thinks they might have R&D expenditure to
“go for it.”
“The whole process is very easy, we undertook the claim in-house,
with help from the Inland Revenue.”
“We’re not a new start-up looking to develop a brand new product.
We’ve been around for 10 years and have been lucky enough to find a
riche in our market that we can now, with help from the tax credit,
continually build on.”
To find out more, visit
www.hmrc.gov.uk/randd
*An SME is classed as a company with less than 250 employees, and
either an annual turnover not exceeding 40 million or a balance sheet
totaling 27 million, and which is not part of a large group.
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