Research & Development Tax Relief - do
you qualify?
Research and Development Tax Relief was introduced in 2000 to encourage companies to make advances
in science and technology. But, 20 years on, we know that many businesses are not taking advantage of
this even though they qualify. Here Ian Kelly, Tax Partner at Davies Tracey, explains further...
Research and Development (R&D) was
introduced, via Corporation Tax (CT) relief, to
encourage companies to undertake innovative
projects to achieve an advance in knowledge or
capability. What many don't realise is that the
project does not necessarily have to be
successful for R&D relief to be claimed - it is
possible to claim relief even if the project fails
in its intention.
The first consideration is the basic premise as
to whether there is a R&D project in place.
If so, the next requirement is that the project
has to be carrying out research and
development work to create a new process,
product or service or making improvements to
an existing one. The advancement has to
increase the knowledge or capability in the
whole area of science and technology and not
merely the company’s knowledge or capability.
There must also be an uncertainty that the
project is trying to overcome and has to be
something that a ‘competent professional’
cannot readily resolve and where the solution
isn’t public knowledge.
There are two schemes; the SME scheme and
the Research and Development Expenditure
Credit (RDEC) scheme.
For accountancy, tax planning
and business advice...
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The SME scheme provides for CT relief of
230% of the qualifying R&D costs; loss making
companies are able in certain circumstances
surrender the loss for a payable tax credit.
The RDEC scheme provides a taxable credit of
12% (13% from 1 April 2020) of qualifying
expenditure. Loss making companies can
claim the tax credit and those with no CT
liability can benefit from a cash payment or a
reduction of tax or other duties due.
Relief has to be claimed within two years of
the end of the first accounting period in
which the qualifying R&D begins.
Talking with a knowledgeable accountant
about what activities you undertake on a daily
basis is the best way of deciding if you have a
qualifying R&D project. Don't miss out on this
valuable source of cash to help your business
grow.
Our team provide a confidential,
reliable and tailored service.
For a FREE, no obligation, initial
consultation contact us on 01642 606003
www.daviestracey.co.uk
hello@daviestracey.co.uk
Swan House, Westpoint Road,
Teesdale Business Park,
Stockton-on-Tees, TS17 6BP
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