R&D relief has been around for more than a decade, however, there are still many eligible companies who fail to claim the relief to which they are entitled.
Typically the companies will be manufacturing companies that undertake process improvements that qualify for R&D relief, however, any company in other sectors may undertake R&D activities, including work on software, which is contributing to the resolution of scientific and technological uncertainty. It should be remembered that expenditure can qualify for R&D relief whether or not the activities are successful in resolving the uncertainties.
There have been recent changes to the operation of the relief that make it even more attractive:
1. The company’s repayment is no longer capped at the underlying PAYE paid in the period.
2. The de minimis limits for making a claim have been abolished.
3. Contract staff, including those providing IT services, can be included in a claim if eligible, regardless of whether they are supplied by an agency or via their own personal service company.
4. Large companies can surrender their R&D loss for a capped tax repayment.
There continue to be differing rates of relief depending on the size of the company. A large company is one with more than 500 staff or with a turnover of more than €100 million and balance sheet of more than €86 million. These limits are twice the size of the normal ‘large’ company limits for most other UK tax law.
SME companies, ie those that aren’t large, can claim an enhanced deduction of 125 per cent of a qualifying spend and continue to have the option to surrender an R&D loss for a repayable tax credit.
Large companies can claim a 30 per cent enhanced deduction or, from 1 April 2013, a 10 per cent above the line credit, which is repayable if certain conditions are met.
We have become aware of mid-tier firms offering ‘free’ R&D claims work to target clients of UK200 Group members in an attempt to disrupt the incumbent advisers relationship with the client, so it is important that members remain proactive in identifying R&D claims for existing clients.
For more information about R&D relief click here – Find out if you can claim Corporation Tax relief on your Research and Development (R&D) project.