Research & Development
Science and technology based companies may be able to claim 200% of research & development (R&D costs) against taxable profit. This can even lead to a company receiving cash back from HM Revenue & Customs (HMRC) if the claim creates or enhances a tax loss.
There are two schemes, the SME Scheme and the Large Company Scheme. They are very similar in most respects with the major exception of the rate of enhanced relief. The SME Scheme provides a 100% enhanced relief, i.e. for every £1 qualifying spend the taxable profit is decreased by or tax loss increased by a further £1. For the Large Scheme, the enhanced relief is 30%.
We have found that many companies are missing out on claims for various reasons. Some of the most common of these are below.
- We are not doing R&D – many companies do not initially realise that their project is R&D
- 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!
Various positive changes to the tax relief have been suggested in a recent consultation. To see a summary of these and a summary of the proposed new 10% tax rate for patent income (the patent box), click on the links below
HM Treasury's Patent Box Presentation
At Armstrong Watson we have many years of experience dealing with claims of all sizes in various sectors including manufacturing, engineering, nuclear, IT and pharmaceuticals.
To see some of our R&D case studies and testimonials, click on the links below:
Donald Engineering and Design Ltd
To speak to Armstrong Watson about Research and Development within your business contact r&d@armstrongwatson.co.uk
If you'd like to find out about how we can help you or your business, please contact us. We'll get back to you as soon as possible..
