R&D tax relief has been available since 2000, and has undergone many changes in its relatively short lifespan. It is available to corporates but not individuals.
What is R&D?
Very briefly, R&D for tax purposes takes place when a project seeks to achieve an advance in science or technology. It can also take place when a company is working to resolve scientific or technological uncertainty, which is where a business attempts to solve a problem where no solution is evident.
In essence, if a business invests in innovation and develops anything that helps the business gain a competitive advantage in a new way, the business is likely to have a very good starting point from which to make an R&D claim.
Hallidays recently supported a business to secure a refund in their corporation tax of £52k for R&D relief. With a clear understanding of how to make a claim for R&D expenditure some businesses are able to reduce their corporation tax year-on-year.
The Autumn 2017 budget brought about several changes to the R&D regime, the principal ones being:
- Research & Development Expenditure Credit (RDEC):
From 1st January 2018, there has been a 1% increase (from 11% to 12%) in the RDEC tax credit a large company (and in some cases SMEs) can claim that incurs R&D expenditure.
- Advance Assurance:
HMRC will run a pilot scheme for a new Advanced Clearance service for R&D expenditure credit claims, which will provide a pre-filing agreement for three years.
HMRC are devising a series of programmes to increase awareness of eligibility for R&D tax credits amongst the SME sector, in response to low levels of R&D claims.
Although the 1% increase in the RDEC rate will principally benefit large corporates, all businesses should closely monitor their expenditure to see if they can potentially qualify for R&D tax relief. There are strict time limits within which claims can be submitted, and if these time limits are missed valuable tax reliefs could be lost.
How Hallidays can help
If you would like help to make a claim for R&D tax relief please read our success story or contact our tax team on 0161 476 8276 or firstname.lastname@example.org for expert support.