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R&D tax relief was introduced in the 2000/01 tax year.
It was, and remains, a way of providing an enhanced deduction for qualifying expenditure in research and development activity.
There are principally two versions of the scheme:
In the first year, only 1,860 claims were made in total. Fast forward to 2017/18 and that is over 48,500
Recent statistics show that the current cost of the tax relief is about £4.3bn a year – quite a bit more than Entrepreneurs’ Relief (£2.7bn) which was found to be too expensive and restricted to within an inch of its life.
£1.8bn of this went to large companies rather than SMEs.
However, it appears that the Government is fully behind R&D relief and there is no indication that it will be removed.
It’s worth pointing out that there is an ability to obtain Advance Assurance – this essentially enables a Company to make its own claims with the pre-approval of HMRC.
HMRC will confirm whether they are conducting qualifying R&D. Where assurance is given, then the first three years of R&D claims will not be subject to enquiry as to whether the R&D undertaken is qualifying.
If you have any queries regarding this article, or research and development tax relief at all, then please do not hesitate to get in touch.