Frequently Asked Questions
1. Can I claim R & D Tax Relief?
Quite possibly but the rules are complex and you do need to have worked upon projects seeking a scientific or technological ‘advance’. R & D claims come from a host of business sectors. We have helped all sorts of companies besides the obvious IT and Pharma operators to claim the relief. These include engineering and construction companies, manufacturers, wholesalers, financial service and marketing boutiques, as well as actuaries and mobile phone players. HMRC estimate that as much as 41% of eligible companies do not claim the relief, either because of the complexity of the rules or a lack of awareness. Of eligible claimants, we estimate that as many as 30 % of claims miss vital areas of R & D activity deflating the claim to go ‘under’ the HMRC radar and setting a low level of expectation for the future.
2. Can only High Tech companies claim R & D tax relief?
No! Tax Insight have made claims on behalf of all sorts of companies besides the obvious IT and pharmaceutical operators to claim the relief. Our clients include engineering and construction companies, manufacturers, wholesalers, financial service and marketing boutiques, as well as actuaries and mobile phone players.
3. How far back can I go?
Two years. HMRC are strict on this point, a company can amend or submit its corporation tax return, to give effect to the claim, at any time up to two years after the end of the accounting period concerned. A ‘protective’ claim can be filed now, if time is tight, to protect the company from this strict time limit. Click here for immediate advice.
4. What sorts of costs qualify?
RDTR has four main areas; staffing, subcontractor costs, consumable & material costs and the costs of equipment used in furthering RD activites.
It is possible to claim for activites carried on around the world, the R & D work can be done anywhere, provided the company itself is actually managed and controlled out of the UK. This is very advantageous as many EU countries restrict RDTR on a territorial basis, meaning the work must be carried out in the host country only. RDTR in the UK is at a much higher % limit than many EU countries. UK companies also benefit from an indefinite loss carry forward regime unlike for example the US which caps losses carried forward to a lifespan of just three years.
5. I don’t employ many of my R & D team, can I still claim?
That is not a problem, but it will mean that the costs will probably be restricted to 65% rather than 100% for non – payroll staff. There are other special rules (Click here for an immediate consultation). Don’t forget that the directors salaries, bonuses and pension contributions can be included in the claim where these are actively related to the R & D project work.
6. Is the cash back taxable?
No, but special rules apply to companies claiming under the Large company scheme from 6 April 2013. Click here for further information
7. What if I haven’t registered a patent or my intellectual property?
Since 2009, there is no longer a requirement for IP to vest with the claimant company. This reflects common commercial arrangements that innovative companies negotiate with ‘Big players’ in the technological field and relaxes the RDTR rules with a welcome simplification. UK and EU patent registrations now have significant tax advantages as the UK harmonises its tax regime for intellectual property.
8. I’m about to sell my High Tech Company, can I claim?
A claim should be made straightaway. For companies already claiming, it may also be prudent to cash in RDTR losses and it is unlikely that these will be transferable into the new ownership because of the special tax rules. Click here for advice.
9. I had some start- up costs but these were ages ago, can I go back that far?
Start- up costs are brought into the company’s first period of accounts, irrespective of when they were actually incurred. So if the end of that first account is within the last two years, yes you can. New companies can also claim a repayable tax credit as an alternative.
10. I need start-up funds for my high tech company, can I get tax relief on that as well?
EIS funding and Seed EIS funding are just two vital and tax advantageous sources of capital. These provide as much as 78% tax relief for the investor as well as tax free capital gains subject to special rules. There is no impact upon the RDTR claim as long as the funds are applied immediately into the company’s business. Click here for advice.
11. I think my high tech company has IR 35 issues I read HMRC are changing the rules. What does this mean to me?
Yes they are, and care is required. New rules introduced from 06 April 2013 will mean much higher penalties for many contractors including those in the R & D environment. The use of contractors is unavoidable for most innovative companies and good contracts are prudent, both to protect from IR 35 and to ensure admissible costs are not ruled out of the RDTR claim. Click here for immediate advice.
12. I outsource my product development to India
SME’s can claim for subcontracting costs. If your company has contracted with a specialist it may still be possible to recover up to 65% of these costs. There is no territorial limit for the UK regime.
13. What qualifies as a “technological advance”?
It will seek to go beyond industry standard practice in the field. Something that creates knowledge that advances our understanding of an aspect of science or technology.
14. What is systematic improvement?
What if I come across something by luck…. There should be a methodology evident; how did the company seek to get from A to B and in what time scale; was a budget or recruitment drive made. These are all evidence of ‘systematic’ pre project or project work, a lucky break in a project need not detract from the R & D environment.
15. What about Product Development?
R & D relief for Experimental Development now exceeds pure science claims filed to HMRC. If your work includes creating new products, or improving your old ones, you are performing product development. The key question is how your company went about this and whether a project based approach was made – was this development experimental?
16. Our Accountant handles the R & D, in the past he has told us we do not qualify
R & D rules can be complex. Tax Insight can work with the company’s existing advisors to identify the full potential of the company’s claim. This means your accountant can concentrate on his specialism and complement this with our resources.
17. There are other UK tax companies who can help me claim R & D tax relief, why should I choose Tax Insight?
There are many RDTR advisors in the market, who will charge significant fees, but our experience shows that the RDTR claim is just one aspect of the tax opportunities open to the UK innovator, and the shareholder and company’s future growth plan is just as important as the company itself.