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Research and Development Tax Advice

Author

Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

Research and development tax relief is by far the most generous of all the corporation tax reliefs currently available to both SMEs and large companies.

Relief has been available since 2001 but many businesses have still not claimed the relief.

At Enterprise Tax we understand the criteria and have made successful claims. The relief isn’t just available for scientists in white coats. We have made claims for clients in various industries such as:

  • Photographers
  • Staircase makers
  • Software providers
  • As well as companies involved in medical research and creating new forms of machines using low energy x-rays to treat cancer.

We are able to work with clients so that they can understand what constitutes R&D for this purpose, whether their activities qualify and then which costs can be included to maximise their claim.

To qualify for the relief, a company has to undertake activities which seek to make a technological or scientific advance.

There is also a requirement that, at the outset of the project, there is uncertainty as to whether the advancement is even possible.

Once a qualifying project has been identified we then look at the costings which qualify for the relief. Broadly the qualifying costs will be:

  • Staff salaries, which includes employers National Insurance and Pension contributions
  • Software costs
  • Materials and other consumables which were expended in the R&D
  • Subcontractor costs – although only 65% of these costs actually qualify

For SME’s to calculate the relief, we multiply the eligible costs by 130%. This amount is then given as an additional (or enhanced) deduction which reduces the taxable profits of the company in the relevant accounting period.

In cases where a company is already loss-making before deducting the additional relief it is possible to make a claim to receive a cash payment from HMRC of 14.5% of the eligible loss.

For large companies the mechanics and the amount of the relief will be different.

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