Research and Development

The R&D tax schemes are HMRC incentives designed to encourage innovation and investment in specific activities by companies operating in the UK. The Government would like to make the UK the most attractive place to start a business and recognises that encouraging innovation is a vital component in improving the UK’s growth, productivity and competitiveness.

We have a successful track record of claiming this valuable relief for clients in a variety of areas. Contrary to popular belief, the activities themselves are not just restricted to groundbreaking scientific work. HMRC defines R&D activities as those which “directly contribute to achieving an advance in science or technology through the resolution of scientific or technological uncertainties”. Simply put, if you have solved a technical uncertainty by making something cheaper, faster, smaller, larger or longer, then the work undertaken could count as R&D (providing the right conditions prevail).

If your company and project meet the necessary criteria, it is possible to claim relief on revenue expenditure (and in some cases capitalised revenue expenditure) across three main areas;

  1. staff costs (salary, NIC, pensions, etc.)
  2. the cost of subcontractors and freelancers
  3. consumable items used or transformed by the R&D activities (i.e. heat, light, power, materials and equipment).

Small company relief

From 1 April 2015 a small or medium sized company can claim a deduction of 130% of the qualifying expenditure (‘enhanced expenditure’) from its taxable profits. The enhanced expenditure is included within the company’s tax return and does not impact the accounts. The relief can either reduce the profits chargeable to corporation tax, or create a loss which can be surrendered by the company in exchange for a cash refund from HMRC.

Large company relief

Profitable large companies can claim a deduction of 30% of the qualifying expenditure from their taxable profits. From April 2016 loss making large companies can claim R&D relief under the new ‘Above the Line Scheme’ (ATLS). Broadly, unlike the small and large company regimes, this scheme does affect the accounts whereby accounting profits will be adjusted for the relief available. The key benefit of this scheme is that it allows large companies which are loss making to claim a cash refund of 11% from HMRC.

Time limits

There is a two year period in which a claim can be made. For example, a claim for the year ended 31 December 2016 needs to be made by 31 December 2018. It’s usually possible to make retrospective claims too, so a company that’s never claimed before can typically make around three claims relatively swiftly.

How we can help

We are regularly introduced to companies that are eligible for R&D tax relief but are either not aware of the scheme or have been advised that they wouldn’t qualify. Our team of specialist tax consultants have the technical expertise and use an innovative approach to work collaboratively with our clients to collate the necessary evidence required for a valid claim. If your company is taking a risk by innovating, improving or developing an internal process, product or service, then it may qualify for R&D tax relief.

It’s rare to find a business where all of the R&D activity is transparent and neatly housed within easily identifiable job roles and functions. We will therefore work with you throughout the entire process to make it as simple and straightforward for you as possible. We can identify any qualifying projects and associated costs, ensure you and your staff fully understand the R&D criteria, prepare the report for submission to HMRC, and provide ongoing advice and assistance in respect of the relief and any potential areas for improvement.

We are even happy to work alongside your existing accountant for an R&D project, so you can benefit from our specialist knowledge without disrupting existing relationships and our advice will not cost you anything until the claim is successfully processed by HMRC.

The Patent Box

The Patent Box is a major tax incentive which allows organisations who pay UK Corporation Tax to elect to apply a very low 10% rate of Corporation Tax from 1 April 2013 to all profits attributable to qualifying Intellectual Property (”IP”). Qualifying IP includes patents granted by the Intellectual Property Office and the European Patent Office, and to existing as well as new IP, and to acquired IP, provided the company has further developed it or the product which incorporates it.