R&D
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Such activities can include developments to drive effi ciencies in production, extension of product ranges, or improvements in product quality. So there is clearly great relevance to consumer goods companies and FMCG businesses in particular.
Easier to get internal buy-in
On 1 April 2013 the rules were changed so that even loss-making large companies can get fi nancial benefi ts from making claims. The mechanism of payment was changed so that it no longer comes through as a reduction in tax payable, but can be a direct payment and therefore show itself as additional income (or a reduction in costs) in both the management accounts and the fi nancial statements. This is signifi cant because it means that the benefi t of R&D claims can now be felt on a cost/profi t centre basis within a company, rather than as simply a reduction in the overall corporate tax charge. Why is this so important? Traditionally, one of the hardest things about making an R&D claim in a large organisation has been the need to get the involvement, buy-in and, frankly, time commitment of the relevant operational part of the business in order to put the claim together. They were doing it for the ‘corporate good’. But now, they have a much stronger incentive to play ball and put the effort in because it can be refl ected in their own cost or profi t centre.
All of this is timely because, having come into effect for expenditure from 1 April 2013 onwards, for many companies it will just be becoming relevant now. For companies with December year ends, the audit has been done, the annual results published, tax compliance work has begun, and thoughts are turning to R&D claims.
TRADITIONALLY ONE OF THE HARDEST
THINGS ABOUT MAKING AN R&D CLAIM HAS BEEN THE NEED TO GET THE INVOLVEMENT, BUY-IN AND FRANKLY TIME COMMITMENT OF THE RELEVANT COMMERCIAL PART OF THE BUSINESS IN ORDER TO PUT THE CLAIM TOGETHER.
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Government-backed
So it’s really important that companies are aware of what they are now entitled to claim for in this area. After all, in today’s increasingly challenging tax environment, there is a risk that organisations confuse the take up of incentives with avoidance activity and fail to claim that to which they are entitled. And in fact, the government is keen that companies should take up their entitlement here. This is a government-backed initiative which is designed to give further incentives to large companies to operate in the UK and make the country a more attractive place in which to do business. Being able to claim for staff costs in R&D activity for example enhances the attractiveness of the UK as a place to employ high value individuals like scientists and engineers, and helps the country to compete in the global knowledge economy.
© 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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