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Additional Tax Relief for Innovative Companies

brilliant-idea-xsAdditional Tax Relief for Innovative Companies

The good news

For every £100 spent on Research & Development (R&D) you could get £46 knocked of your tax bill, with the government encouraging small firms to claim where applicable.

The bad news – What you need to do

You, or someone in your company, will have the technical expertise to determine if you are truly doing R&D as per the Government Guidelines.  They will have to keep record of the relevant projects and be able to identify what costs are being incurred.

Definition and explanation of R&D

R&D for tax purposes takes place when a project seeks to achieve an advance in science or technology.

Activities which achieve this advance by resolving scientific or technological uncertainty are R&D.

Scientific or technological uncertainty exists when knowledge of whether something is scientifically possible or technically feasible, or how to achieve it in practice, is not readily available or deducible by a competent professional working in the field.

 

You should be extending overall knowledge by:

-creating a process, material, device, product or service which incorporates or represents an increase in knowledge

-making an appreciable movement in an existing process, material, device, product or service which incorporates or represents an increase in knowledge

It should be something truly new, truly innovative, not just extending the company’s own knowledge.

R&D tax relief

From 1 April 2015, the tax relief on allowable R&D costs is 230%. This means that for every £100 of qualifying costs, your company could reduce your Profit Chargeable to Tax by an additional £130 on top of the £100 spent.

R&D tax credits

If your company makes a loss, you can choose to receive R&D tax credits instead of carrying forward a loss. It’s a cash sum paid to you by HMRC – if your company has liabilities for PAYE and National Insurance contributions for the same period.

The amount of tax credit you can receive is limited to the total amount of PAYE and National Insurance contribution liabilities, but it does include liabilities for all directly employed staff – not just those working on the R&D project.

Subsidies or Grants for R&D

If your company receives a subsidy or grant for an R&D project, this may affect how much tax relief you can claim.

Advance Assurance

An Application for Advance Assurance for Research and Development tax relief can be made.  If the application is successful, it means that the first three years’ R&D claims will not be queried. (Contact us for additional details)

Next Steps

If you believe the above relates to your company, please let us know and we can investigate whether you can make a claim and if so how much of a claim you can make.

Further Information

For additional information please read the BIS (Department for Business, Innovation & Skills “Guidelines on the Meaning of Research and Development for Tax Purposes” which includes examples of the sort of things which qualify and don’t qualify.  We will then be happy to discuss assisting you in your claim.

 

Philip Loveridge

Written by Philip Loveridge of Spurling Cannon

If you would like to contact Phil about this blog post or any other accounts related matter, please e-mail him on philip.loveridge@spurlingcannon.co.uk or phone the office on 01843 848383

 

 

 

Spurling Cannon Limited have made every effort to ensure accuracy at the time of publication. Information may be subject to legislative changes. Recipients should note that information may not reflect individual circumstances and should, therefore, not act on any information without seeking professional advice. We cannot accept any liability for actions taken or not taken as a result of the information given in this publication.

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