This is the most generous tax relief available and is targeted at businesses who are developing new ideas and growing the body of knowledge in their industry and beyond. This is relevant to the future, and any work done in the last two years.
If you qualify as an SME and you are profitable you can claim a massive 230% of the cost incurred on Research & Development (R&D) in the period to reduce your company tax. If you are making a loss you can receive a payment from the government called a ‘tax credit’. There is a formula for calculating how much you are paid.
What is an SME?
Less than 500 employees
Annual Turnover under £100m
Net Assets under E86m
Is your project eligible?
The definition of R&D is not that generally used commercially, we are looking for work that creates ‘an advance in the field of science and technology’. Any business undertaking this R&D must be contributing, not just to their own knowledge and understanding but the broader capabilities of science and technology.
How do you prove your project is eligible?
This is key to establishing your eligibility to the R&D enhanced relief. An explanation of what scientific and technological uncertainties you faced and how you overcame them is vital if your claim is to succeed. Explaining that you sought the knowledge of professionals who also did not have the answers to your questions is essential.
What are the benefits of Advance Assurance?
When seeking funding for a project, advance assurance can give you the confidence to confirm to your financiers that the project attracts this relief and so costs are mitigated. With an assurance from HMRC that your project qualifies you can calculate the net project costs accurately.
This is available to the smallest companies, less than 50 employees and turnover below £2m.
You submit details of the project you are embarking on, stating the uncertainties you will be addressing and identifying where you will need to create new knowledge. HMRC will confirm the eligibility so that you can make your claims with confidence.
R&D expenditure incurred in the financial period to December 2016 must be claimed by December 2018. This is because the claim is made on your Company Tax Return and it is only possible to amend the returns for the last 2 years.
In April 2017 you can amend your company tax returns dating back to year end April 2015.
Have a good think about whether the R&D you’ve been doing in the last two years could qualify, or anything you’re planning for the future fits the requirements. Act now to ensure the claim window is not missed.
All details above were correct at the time of publishing - for more up to date information please
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