Research & Development (R&D)
Research & Development (R&D) tax reliefs are a very valuable (and often overlooked) tax break. R&D Tax Credits in particular can be a lifeline for the cash-strapped research company.
At Hackett Griffey LLP, we have considerable experience of preparing R&D tax relief claims. Since the case of B E Studios Ltd v Smith & Williamson Ltd (2005), HM Revenue & Customs have scrutinised claims much more closely so you need to ensure that your case is robust.
The SME scheme allows for an enhanced 175% deduction and the possible surrender of the resulting loss for a repayable tax credit and so is particularly valuable.
If you think you are entitled to R&D tax relief, then before we help prepare your claim here are some questions that you need to ask yourself:
Is it R&D?
Are we trying to do something that involves us having to develop scientific or technical knowledge that isn't commonly available (i.e. in the public domain)?
What are the scientific or technological challenges we had to overcome as part of this work? These have to be uncertainties that competent professionals working in the field cannot readily resolve and where solutions are not common knowledge.
Does the expenditure qualify?
Does the expenditure exceed the minimum £10,000?
The expenditure must be revenue in nature. If it is capital then enhanced R&D relief will not be available but 100% capital allowances may be.
The revenue must come within the following headings:
- Consumable items
- Computer software
- Qualifying staff
- Externally provided workers
- Subcontracted activities
Does the intellectual property vest in the company?
Are we in time?
Since 1 April 06 a claim for enhanced R&D must be made on the company tax return within 1 year of the normal filing date.
Do we qualify under the SME scheme?
You must be an SME.
Has a notified state aid been received in respect of the project?
This covers many grants and may prove fatal to an SME R&D claim, however small the grant, although a claim under the large company scheme may still be possible. You may need to check with the grantor whether it is a notified state aid.
Has the expenditure been met by someone else?
This may prove fatal to an SME R&D claim.
If the repayable tax credit is sought then the company must have paid an amount equal to the repayable tax credit in PAYE and National Insurance.
