finance 51 Tax turns innovative


Grant Thornton UK LLP is moving full steam ahead with its investment into a new national innovation team, set up to increase its national market offering to businesses who deal in all areas of innovation, including research and development. Samantha Vanags and Katy Rabindran discuss the evolution of the team and its plans for the future


The 2013 Budget was a great indicator of the Government’s continued support and encouragement of UK businesses carrying out qualifying research and development (R&D), and the exploitation of registered patented technology, with the announcement of more generous tax reliefs for these businesses, and the introduction of the widely anticipated ‘patent box’.


These announcements form part of the Government’s wider economic plans to generate more income from the science and technology industry, by making the UK a competitive market for both national and international innovative businesses.


What is R&D for tax purposes?


Essentially, it is the investment into achieving an advance in science or technology through the resolution of scientific or technological uncertainties. This could be a newly improved product or process; it doesn’t have to be rocket science.


The UK legislation currently provides two types of R&D tax relief, depending on the size of the company or organisation; the small or medium-sized enterprise (SME) relief, and the large company relief. Each of the reliefs can be claimed


Description Super-deduction


Allows companies to deduct an additional amount on top of their qualifying R&D expenditure with their tax returns.


Cash credit claimable Allows companies to claim a cash repayment from HMRC.


in two different ways; a super- deduction, and a claimable cash credit from HM Revenue & Customs (HMRC). Historically, the legislation did not allow large companies to claim a cash credit, however from April 1, 2013, the Government introduced an R&D expenditure credit, where this is now possible. A summary of the reliefs are given in the table below.


Patent Box


In addition to these reliefs, the patent box regime was introduced with effect from April 1, 2013. Broadly speaking, the patent box enables companies to apply a 10% corporation tax rate to profits earned from its patented inventions and certain other innovations.


Innovative thinking


The innovation team has strategically evolved from a group of R&D specialists mainly working in London and the Thames Valley region, to an expanding national network of dynamic innovation specialists. Regional specialists are currently situated in several local offices including Manchester and Cambridge; the plan being to expand the team to 25 heads by FY2016.


Samantha Vanags created and heads the innovation team, and


SME relief


Extra deduction of £125 allowed for every £100 spent on qualifying R&D. This gives a net cost of £48.25 on £100 of qualifying R&D expenditure when a 23% corporation tax rate is applied.


Available to loss making SMEs at a rate of 24.75%. This gives a net cost of £75.25 on £100 of qualifying R&D expenditure.


has worked in R&D since the relief was first introduced in 2000. Having attended and influenced many of the HM Treasury consultations regarding the recently enacted legislation, Vanags has not only key technical insight into the legislation, but invaluable practical experience in dealing with HMRC and its views on a broad range of issues that exist within R&D claims. As a result, the team has a good working relationship with many of the R&D inspectors at HMRC, which is valuable when settling HMRC enquiries into R&D claims.


Katy Rabindran leads the team in the Thames Valley. She says: “The Thames Valley is a real hub for innovative companies, and we work on claims for everything from satellites launched into space, to improved software solutions for Internet dating. These reliefs are far more widely available than many companies first think, and the cash refunds generated from HMRC can be substantial – recently one of my clients secured over £1 million in cash refunds.”


The team uses methodologies agreed with HMRC when preparing and submitting R&D claims. They invest a great deal of time at the outset to understand the key R&D projects carried out by the business through interviewing or conducting workshops with key


Large company relief


Extra deduction of £30 allowed for every £100 spent on qualifying R&D. This gives a net cost of £70.10 on £100 of qualifying R&D expenditure when a 23% corporation tax rate is applied.


Available to large companies at a gross rate of 10% of their qualifying R&D expenditure. This gives a net cost of £69.30 on £100 of qualifying R&D expenditure when a 23% corporation tax rate is applied.


THE BUSINESS MAGAZINE – THAMES VALLEY – SEPTEMBER 2013


Samantha Vanags


Katy Rabindran


personnel, followed by detailed data analysis to extract associated qualifying costs in relation to the R&D projects. The team also work with businesses in preparing the accompanying narrative which describes why the projects are qualifying R&D. This methodology has proved very successful in ensuring robust, fully supportable claims are submitted to HMRC.


The team has worked, and currently work with many dynamic businesses that are very influential within the UK’s science and technology industries, with extensive experience in both SME and large company claims.


Details:


Samantha Vanags 01865-799805 samantha.j.vanags@uk.gt.com


Katy Rabindran 01865-799846 katy.j.rabindran@uk.gt.com


www.businessmag.co.uk


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