R & D Tax Relief has provided innovative companies with over £1.2bn of tax relief last year. These companies have come from all types of industries besides the IT and pharmaceutical sectors. HMRC processed 12,000 claims to relief last year – can you join them?
The relief is a government sponsored scheme to stimulate the tech economy. It has long term funding until at least 2019 and means the UK can keep pace with tax breaks widely available in the EEC and US. The reliefs have been around since 2000 but are many think they only apply to very high tech innovation and the IT and Pharmaceutical industries. HMRC are keen to roll the relief out to all types of innovative companies so the UK can compete internationally in the tech economy.
What is R & D?
R & D is where the company attempts to innovate, making a product, process or system more efficient, greener or sometimes even more basic.
It can apply to many types of industry. Common examples are
- Construction, Architecture, Building Materials
- IT, Telecoms, Systems
- Pharmaceutical and Life Sciences
- Gaming technologies
- Food and Drink production
- In- house Product design and software
- Digital marketing
If your company is in any of these sectors or doing any of these in house activities, it should be considering R & D. If your company hires qualified staff or expertise, makes up prototypes or beta versions or trials new products, you should be thinking of R & D.
My Accountant said I don’t qualify!
Around 60% of our case studies begin here. Accountants are specialists in accountancy but this complex area of corporation tax is often overlooked or dismissed. Fortunately, HMRC will accept back dated tax calculations going back up to 3 years.
Even where the company is claiming we have found our expertise can add real value, typically enhancing a claim by up to 40%.
What is it Worth?
Our typical recovery is £48,000 but the relief has no upward or minimum limits. Payroll and consultancy costs can be reclaimed, as can the cost of materials used in project work and certain premises costs.
The tax credit was uplifted in the 2014 Budget to 14.5%. This means a profit maker can recover 26% of costs and a loss maker 32%. With a payroll of just £50,000 p.a. this can quickly add up!
Example: Tax Relief Benefit
Company A spends £250,000 on R & D costs:
Pre-tax profit before R & D relief £500,000
Corporation tax due at 20% £100,000
R & D Claim:
Additional corporation tax relief
225% x £250,000 £562,500
Corporation tax due £0
Corporation tax repayable £120,000
Claiming R & D relief does not ‘punish’ or raise the profile of a company. HMRC are tasked to repay 95% of claims within 28 days, and the relief has EC funding through to 2019.
See you at Silverstone!
I am looking forward to meeting you at Silverstone, there are some very exciting technologies breaking through and R & D relief can add a real cash injection. It has been a very exciting year for me, having recently published the UK’s leading authority on R & D… R & D Tax Relief – The Innovative Economy, Published by Bloomsbury Professional Press.
Corporate Tax Partner
Tax Insight UK
Tax Insight UK
Tax Insight UK is a tax consultancy firm providing independent advice to innovative companies. Maria Kitt has over twenty years’ experience in corporate tax and is a member of the technical committee assisting companies with the relief. She has recently published the UK’s leading authority, ‘R & D Tax Relief’ by Bloomsbury Professional Press.
Tax Insight UK has a 100% success rate in filing R & D tax relief claims going back to 2002.