R&D tax credits
Research and development (R&D) by companies is being actively encouraged through a range of tax incentives including an increased deduction for R&D revenue spending and a payable R&D tax credit for companies not in profit. At Walker Dunnett & Co, we have extensive knowledge of R&D claims and can advise your company on this tax relief.
The incentives are only available to companies and include:
- increased deduction for R&D revenue spending and
- a payable R&D tax credit for companies not in profit.
The R&D revenue relief increases the amount a company can obtain tax relief on to more than the normal 100% revenue deduction. This relief is 230% for expenditure incurred by a SME on or after 1 April (previously 225%). Large companies are subject to a different regime not considered here.
Alternatively a SME may claim a payable R&D tax credit for an accounting period in which it has a surrenderable loss. For expenditure incurred on or after 1 April 2014 the amount of payable tax credit that a company is entitled to for an accounting period is 14.5% of the surrenderable loss for that period.
There are two main considerations to establish whether the reliefs for R&D are available.
The first essential matter to determine is whether HMRC would accept that the particular activities constitute R&D.
Relief is available if a project seeks to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty and not simply an advance in its own state of knowledge or capability.
Furthermore it must be related to your company's trade either an existing one, or one that you intend to start up based on the results of the R&D.
The second consideration is to ensure the relevant tax 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
- the expenditure must not have been met by another person (if the R&D project is funded in whole or part by notified 'State Aid' such as a government grant, none of the spending on that project can qualify for R&D tax credits).
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