Specialist help with R&D tax relief claims
The Government has recognised this issue and put in place R&D tax credits (with two different approaches for SMEs and larger companies), which are designed to encourage companies to invest in research and development. The scheme provides cash payments as well as reductions in Corporation Tax liability and is typically worth about 25% of development expenditure.
The R&D incentives available to both large and SME companies have been increased for expenditure incurred from 1 April 2015. So currently for 2016 they are:
- SME relief has been increased from 225% to 230% from April 2015
- Payable credit – £33.35 from 1 April 2015 for every £100 spent. Higher relief available where relieve deductions against taxable profits.
- Company can claim for expenditure on R&D it sub-contracts to others
- Company cannot claim for contributions to independent research
- Claim can be reduced if the R&D project is subsidised or a grant is received in respect of it
- The condition requiring ownership of the intellectual property arising out of the R&D has been abolished for accounting periods ending on or after 9 December 2009.
- The “above the line” credit for large companies increases from 10% to 11%.
- Enhanced tax relief rate of 130% from 31 March 2008 .This is being replaced by the “above the line credit”
- Company can only claim for expenditure on R&D it carries out itself, unless it sub-contracts R&D to certain qualifying bodies, individuals or partnerships of individuals
- Company can claim for contributions to independent research
- No reduction for grant or subsidy
- Company need not own the intellectual property arising out of the R&D.
What counts as R&D? (and factors which can affect it)
Relief can be claimed by companies that have incurred expenditure on qualifying projects that are relevant to the company’s trade. Resolving uncertainty with new products, services and processes, even if unsuccessful, can be qualifying activity.
Your business can benefit if it:
- looked for faster, more efficient or more effective solution
- created a new product or made improvements to an existing one
- explored new methods and processes
- trialled new materials or computer code
- solved problems or overcame issues for customers rather than simply taking an order or brief
Furthermore, the activity does not have to create something completely new from scratch. It could include improving existing products or process such as exploring new cost effective materials which will allow a product to perform better.
Types of expenditure
Qualifying expenditure is incurred on activities which are either directly or indirectly related to the R&D project. Expenditure falls into several different categories as follows:
- staffing / employee costs
- expenditure on consumable or transformable materials
- costs of work done by subcontractors and externally provided workers
- costs of clinical trial volunteers
How R&D claims can help businesses
The UK offers some of the world’s best research and development tax incentives, however many businesses overlook this source of cash because of time constraints, lack of resource or expertise.
Historically the requirements to qualify for the research and development tax credit were rather difficult to obtain. However, the new regulations are much more taxpayer-friendly and provide the following benefits:
- a hidden and immediate source of cash for many small and mid-size companies
- every successful company is potentially eligible for tax credit
- creates a vehicle for additional tax savings in future years
- increases market value, earnings power and cash flows of a company
- reduces company’s effective tax rate
Who can qualify for R&D tax credits
Despite the significant benefits available, many businesses still miss out partly due due to a lack of awareness of the schemes, and partly because many companies don’t realise they qualify
Our team of tax and technical experts have worked with hundreds of companies across a wide range of industry sectors. Below are some examples of sectors who can qualify and ways that research and development can benefit the business financially:
- Developing new construction methods to increase a building/structures cost or environmental effectiveness
- Providing solutions to complex building design concepts
- Combining a number of new technologies within a single building system and design
- Developing software modelling within BIM in order to produce new building designs or methodologies
RIBA Head of Technical Research Anna Dye said “It is important that architects realise that work which is part of their day-to-day activities could actually fall under the heading of R&D for tax purposes.”
Chair of the RIBA Research and Innovation Group Professor Murray Fraser said “British architecture depends on investment in R&D to keep it at the forefront of the profession worldwide. In the current climate, support for practices who undertake R&D is more important than ever.”
- making improvements to manufacturing processes or machinery (doing things faster / at a better quality / with reduced waste or improved safety)
- ergonomics – ease of operation or suitability of manufactured products
- computer models – for example, to evaluate stresses or fluid flow
- using new, unproven methods of manufacturing existing products
- developing ways of manufacturing new products
- increasing process efficiency / safety
- reducing emissions
IT & Software
- Incorporating new or untested technology into products
- testing new technology or programming languages, where there’s little information on their usage in the public domain
- making existing products work on new platforms, where this involves overcoming technical problems that haven’t been solved before
Scientific & Technical
- genetic analysis of agriculturally important organisms or phenotypes
- development of protocols for the identification of disease agents
- development of new biomarkers (ie molecules that can act as a flag for disease)
- making improvements to the specificity or accuracy of test protocols.
Do you qualify?
Whether you are a big company or a small business, you can qualify for R&D tax relief. Please get in touch with our local Leeds office and we can assess the product or service you’re planning to include and if your claim is truly innovative at a technological level, or an advance on what’s currently available in the market.
Why choose Haines Watts R&D service?
R&D tax claims can produce significant savings for businesses so exploring a potential claim with an experienced tax advisor is always worthwhile. Here are the benefits of working with Haines Watts:
100% Success Rate
Our knowledge and our diligence in preparing detailed, robust claims ensures our success and means you can have confidence in our approach.
Enhancing your claim
Our combination of R&D tax expertise and commercial experience helps us to investigate all relevant expenditure for opportunities to improve your claim.
We are confident enough to work on a contingent fee arrangement meaning there is nothing to pay unless the claim is successful.
Many years of experience in the R&D field. We combine specialist tax expertise with hands-on R&D and product development experience.
How Haines Watts have helped companies qualify for tax relief
In the past 12 months alone we have successfully claimed in excess of £17.9million additional tax deductions for our clients of which has resulted in more than £3.5million of cash being refunded by HM Revenue & Customs. Haines Watts are proud to say we have a 100% success record with our claims.
Even if you have already made a claim it is advisable to have it reviewed by a specialist to ensure the maximum has been claimed, which may result in additional savings for you.
Claim R&D tax credit
Please contact one of our tax specialists in Leeds for further information or a no obligation meeting to discuss R&D tax relief opportunities. We will assist with identifying tax-allowable R&D expenditure, necessary calculations, and submit appropriate claims to HMRC on your behalf. R&D tax claims should not be dealt with in isolation and must be considered as part of the company’s overall tax strategy, which is why it is best to deal with a tax advisor who has a detailed understanding of tax.