TT164: R & D Tax Credits

In the last budget, the Government announced significant improvements to what were already generous tax breaks to companies involved in Research & Development.

For every £100 spent on qualifying R&D a company can currently claim a tax deduction of £175 and a loss making company can receive immediate tax refunds from HM Revenue & Customs (HMRC).

What’s more, the Government is currently passing legislation to increase this uplift to 100% back-dated to 1 April 2011 and to 125% from 1 April 2012.

Many companies undertake R&D but may think that to qualify for the tax credits the work must involve test tubes, lab coats and Nobel Prize winning advances in science but this just isn’t so.

 

Who could make a potential claim?

Only companies can make a claim, not individuals or partnerships, and for a claim to qualify a project must “seek to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty”.

So as well as scientific advances, advances in technology, engineering, and computer software programming could qualify. What is important is that no-one else has done what you are seeking to achieve.

Currently a minimum spend of £10,000 p.a. is required to qualify but the Government is planning to scrap that requirement from 1 April 2012.

 

What expenditure can be claimed?

The allowable costs fall under a series of headings, the most significant of which is likely to be employee costs. The cost of wages, employer’s NIC and pension contributions of staff directly involved in R&D can be claimed as can the costs of staff who are managing or ‘supporting’ the R&D project. If an employee spends part of their working week on R&D, then a proportion of their wage etc costs can be claimed.

Other qualifying costs include materials, utilities, computer software and a proportion of sub-contractor costs. All provided, of course, that they are incurred as part of the R&D project.

Plant & Machinery can also form part of a claim as qualifying P&M can claim Capital Allowances at 100% and so be written off for tax purposes in full in the year of purchase.

 

How can Barnes Roffe LLP help?

We have the experience to prepare your case to help you obtain HMRC agreement that the project qualifies and then to maximise the amount you can rightfully claim.

A profitable company can see its taxable profits greatly reduced whilst a loss making company can ’surrender’ the losses for an immediate tax credit from HMRC.

Want some more information? Contact your Barnes Roffe Partner without delay.

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