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HM Revenue & Customs recently published statistics for the Research & Development Tax Relief for companies and these make shocking reading. In 2009/10 the number of companies claiming was only 9,410, of which 7,410 claimed under the very generous SME scheme which allows for an additional deduction against taxable profits of 125% of the qualifying R&D expenditure. Loss making SME companies can surrender tax losses for a non-taxable cash refund.
There are still many companies not making a claim for this relief, and the same misconceptions remain:
• We are not doing R&D - many companies do not initially realise that their project is R&D – it may even be a process and not an end product
• Claiming the relief is complicated - not if you seek good advice
• The costs of claiming outweigh the benefits - this is rarely the case
• We cannot separately identify costs - HMRC does not expect the company to reinvent its accounting records to make a claim and will accept some elements of estimation
• We received a grant towards R&D, we cannot have the tax relief too - this is by far the biggest misconception. The receipt of a grant may affect how much additional tax relief the company can claim but you can have both!
Nigel Holmes, Corporate Tax Director at Armstrong Watson, has been involved in R&D tax relief claims since their introduction in 2000. He says “During these difficult economic times, this generous tax relief can be used to provide tax free cash for loss making R&D companies, or substantially reduce a tax liability, and I encourage all companies in science or technology sectors to consider claiming and speaking to an expert on the relief. I have seen plenty of successful claims in IT, manufacturing, engineering, pharmaceuticals and nuclear sectors, and am proud to say that the proportion of Armstrong Watson clients claiming the relief exceeds the national average”.
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