ENTERPRISE & INNOVATION


FEATURE


HMRC support for enterprising companies


By Scott Burkinshaw (pictured), Tax Partner and Head of the Radius team


Are you claiming the relief you are entitled to? Could you reduce your Corporation Tax bill or even claim cash back from HMRC? For almost 20 years, successive UK governments have


recognised the vital role played by innovative companies in driving economic development and have sought to incentivise such companies by offering targeted tax relief. Initially offering tax credits for companies carrying out R&D, more recently an additional tax relief was introduced for companies which generate profits from patented inventions. Together these reliefs form a vital measure of support for


many enterprising companies, but many of those eligible remain unaware of the available benefits.


THE BENEFIT Since its introduction, R&D tax relief has slowly increased in terms of uptake. However, HMRC believes the relief is significantly underclaimed and indeed the most recent Government statistics available show that in 2016/17, out of £3.5bn claimed nationally, less than £150m of the relief was claimed by companies that are headquartered here in the East Midlands. The relief available is significant – for SMEs, every £1,000


spent on qualifying R&D costs can generate tax relief of almost £250 in tax savings, which many claimants use to fund further development work. Qualifying costs include the salary costs of those members of staff involved in R&D, plus consumables, software, and certain subcontracted costs. If a company is loss-making for tax purposes, then it may be possible to cash in the R&D element of the loss for a cash payment from HMRC.


WHAT IS R&D? Confusingly, the definition used by HMRC is different to that used for accounts, commercial or engineering purposes. The definition which HMRC use is that R&D takes place when there is a project that seeks to achieve an advance in science or technology through the resolution of technological uncertainty.


R&D takes place when the project seeks to advance science or technology


R&D can be found in any industry and sector, provided the


project involves an advance in science and technology. It’s crucial that the advance is for the whole of the specific field of expertise and isn’t just the company innovating to catch up – unless it’s not possible to easily determine how to replicate an advance that is already available.


business network October 2019 61


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