What is your Research & Development worth?
Research and development (R&D) by UK companies is actively encouraged by Government through a range of tax incentives which continually improves year on year. Qualifying capital expenditure attracts an upfront 100% deduction under capital allowances but the R&D relief schemes focus on qualifying revenue expenditure and are only available to companies.
There are two schemes, one for
companies and one for small and medium sized enterprise (SME) companies.
schemes now provide two main elements of relief: •
This article focuses on the SME scheme only.
The SME scheme The R&D revenue relief increases the amount a company can obtain tax relief on from the normal 100% revenue deduction to 225%. If the impact of this revenue deduction is that the company incurs a loss which it cannot relieve until a future period then it can be converted into the repayable tax credit. Budget 2014 announced that the rate of converting such a loss into a repayable credit would increase from 11% to 14.5%.
This
applies to qualifying expenditure incurred on or after 1 April 2014 onwards.
The SME relief in operation Challenge Ltd is an SME and incurs qualifying R&D expenditure during the year to 31 March 2015 of £120,000. •
an increased deduction for R&D revenue spending and
• a payable R&D tax credit for companies not in profi t.
large Both
will reduce its corporation tax liability by £54,000 (assuming a 20% rate), giving the company eff ective relief on the actual expenditure of 45%.
•
If, on the other hand, Challenge Ltd makes a loss of £270,000 (all attributable to the R&D expenditure) which would otherwise be carried forward for relief against future trading profi ts then it can be converted into a payable R&D tax credit. The revised rate of conversion of 14.5% would generate a payment to the company of £39,150 (£270,000 x 14.5%) which equates to approximately 33% of the original expenditure.
Some key conditions: To obtain SME R&D relief the fi rst essential matter to determine is whether HMRC would accept that the particular activities constitute R&D. The second is making sure the relevant tax rule conditions are met, the most important being: • the expenditure must be from a qualifying revenue category and not be capital expenditure
•
the spending must not be incurred in carrying out activities contracted to the company by another person (however a slightly diff erent form of R&D tax credit may apply)
•
the expenditure must not have been met by another person (if the R&D project is funded in whole or part by ‘State aid’ such as a government grant, none of the spending on that project can qualify for R&D tax credits).
If Challenge Ltd is profi table it will be able to claim a deduction in respect of this R&D expenditure of £270,000 which
82
R&D does not however have to be undertaken in the UK.
Kindly provided by The A9 Partnership Ltd To advertise in thewire t. 07720 429 613 e.
the.wire@btinternet.com
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100