Research and Development expenditure

Research and Development expenditure photo

Companies can currently claim additional tax relief for expenditure of a revenue nature incurred on qualifying “research and development” activities.

Legislation was introduced in 2012 which increased the rate of the additional tax relief from 100% to 125% for qualifying expenditure incurred by small or medium-sized enterprises (SME’s) on or after 1 April 2012.

This gives a total tax deduction of 225% on the expenditure incurred and an effective corporation tax relief equal to 45% (based on the current 20% small companies corporation tax rate).

If a company is currently loss making, which it may be during the early years of trade, the loss applicable to research and development can be surrendered in return for the payment of an “R&D tax credit”.

The government has also introduced further changes in respect of expenditure incurred on or after 1 April 2012 as follows:

  • Abolishing the rule previously limiting a company’s R&D tax credit to the amount of PAYE and NIC’s paid in a particular year
  • Abolishing the £10,000 minimum expenditure condition
  • Simplifying the scheme in respect of work done by subcontractors

We can assist you with the submission of successful claims by;

  • Discussing research and development projects being undertaken and assisting in recognising qualifying activities
  • Producing detailed reports illustrating how qualifying R&D projects meet HMRC guidelines
  • Dealing with the submission of claims on the company’s behalf to the HMRC specialist R&D units
  • Corresponding with HMRC in relation to any further information required and agreeing the claim.