Month: April 2013

  • Large Companies R&D Expenditure Credit

    Large Companies can access a new R & D Programme from 01 April 2013:

    The R&D Expenditure Credit

    On 1 April 2013 the new R&D Expenditure Credit (“RDEC”) credit will be available on an “opt-in” basis for large companies that undertake qualifying R&D work. RDEC will be mandatory from 01 April 2016 or for companies opting in now. SMEs will continue to claim under the existing “enhanced deduction” SME scheme unless the R&D expenditure incurred only qualifies under the Large Company Scheme.

    The main advantage of RDEC is the potential for loss making large companies to claim a refundable cash credit for eligible R&D expenditure incurred. Reporting and accounting for R & D is no longer opaque.

    The RDEC is calculated as 10% of eligible R&D expenditure. This credit is applied directly to reduce the company’s corporation tax bill for the year. For companies with no corporation tax liability the RDEC may be refundable in cash. This provides much greater certainty of receipt when compared to the previous “enhanced deduction” scheme where large companies would have to wait until turning a profit to realise the benefit of the claim.

    The eligibility requirements for what constitutes R&D for tax purposes and the types of qualifying expenditure will not change. The only change is the mechanism used to reduce the corporate tax bill and the option for loss making large companies to claim an immediate cash benefit.

     

  • Tax Relief for the Creative Sector

    Creative Sector Tax Relief

    New Program – Creative Sector Tax Credits

    From 01 April 2013, UK companies that are involved in the production of animation, high-end television, and video games may qualify for a new form of tax relief. The relief is similar to the R & D tax credit system. It provides:

    an additional corporation tax deduction for the production company or developer at a rate of up to 100% of qualifying UK production or development expenditure (or, if lower, 80% of the total qualifying production expenditure); or

    a 25% payable cash tax credit, for surrendered losses

    To qualify under this new programme:

    • an incorporated company must be engaged in the production of such animation programme, high-end television programme or video game
    • the content must meet the definition of animated, high-end television, or video game
    • the production must be intended for broadcast or commercial release
    • the production must be certified as a cultural product by satisfying a UK cultural test (point based system)
    • at least 25 per cent of the core expenditure incurred by the production company must relate to expenditure on goods or services that are used or consumed in the UK

    Companies already claiming R&D will not be able to claim tax relief twice on the same R&D expenditure. Similarly, where a company claims tax relief in one creative sector, it will not be able to claim relief on the same expenditure in another creative sector.

     

  • Patent Box-Tax Breaks for Intellectual Property

    The  UK’s Patent Box regime attains a 10% tax rate for relevant IP profits. The relief is being phased in from 01 April 2013. The Patent Box legislation is complex but seeks to support the R & D tax relief programme. The programme applies to all technology capable of being patented. Qualifying patent offices are either:

    • the UK Intellectual Property Office, or
    • the European Patent Office, or
    • national offices of certain EEA States (Austria, Bulgaria, Czech Republic, Denmark, Estonia, Finland, Germany, Hungary, Poland, Portugal, Romania, Slovakia, and Sweden)

    Relevant intellectual property includes

    • Licenses / royalties of rights over a patent or patented item or process
    • Sale of patent itself
    • Direct sale of patented product; product containing patented component; components wholly or mainly designed to be incorporated into patented product
    • The use of patents in internal processes or to provide services
    • Licensees of patents provided license is exclusive and countrywide
    • Infringement / damages / insurance income from patent rights

    To access the Patent Box, the company must undertake “qualifying development”, by making either

    • contributions (cost / time / effort) to the creation or development of the invention claimed in the patent; or
    • activity to the development of a product / process incorporating this invention

    If the company is a member of a group it can meet this requirement by actively owning the patented invention by taking a significant role in managing the portfolio of eligible patents.

    Tax relief applies to profits from:

    The company must elect into the programme within two years from the end of the accounting period in which the relevant profits arose. The company can also elect to include profits from a “patent pending period” to the profits of the period once the patent is granted.

    Tax Entry costs into the Patent Box will require careful appraisal, for more information contact us…. (contact link)

    A further stimulus is the announcement in February 2013 of a single UK / EU registration scheme, short cutting separate territorial registrations. Click here for more….. http://www.ipo.gov.uk/pro-types/pro-patent/pro-p-os.htm

  • Eureka! – R & D Tax Credit Claims

    In a lather about research and development claims? MARIA KITT clarifies the subject

    KEY POINTS

    • The basics of research and development relief.
    • Qualifying projects and SMEs.
    • SSAP13, CTA 2009, Pt 13 and DTI/BIS guidelines.
    • Qualifying expenditure and CTA 2009, s 1044 et seq.
    • Capital allowances and claims under CAA 2001, s 437.

    Once upon a time, the Chancellor of the Exchequer introduced a raft of generous tax incentives to encourage expenditure by UK companies on scientific or technological research.

    Ten years on, the legislation has become more complex and unwieldy, and there can be no doubt that research and development (R&D) companies face a number of almost prohibitive obstacles to access the reliefs.

    In 2009, the latest year for which figures are available, more than 8,350 companies claimed an estimated £980 million of R&D relief. This brings the total to more than £52 billion since the schemes were introduced.

    Sister grant organisations paid £190 million in collaborative grants and a further £25 million through the R&D grant scheme in the year ended April 2010.

    There are two principal tax relief schemes in the UK: the SME scheme and the large company scheme. There is also a scheme to provide relief for R&D on certain vaccines and medicines. In 2009, SMEs accounted for more than 82% of R&D claims.

    Astonishingly, a whole HMRC industry seems to have been spawned around the regime, with more than 14 regional R&D units as well as the dedicated inspectors examining larger or complex claims in Large Business Offices.

    Coupled with the apparently perpetual reform since its introduction, …