Chartered Accountants & Tax Professionals. A Guide to Research & Development Tax Relief for SME Companies

Transcription

1 Chartered Accuntants & Tax Prfessinals A Guide t Research & Develpment Tax Relief fr SME Cmpanies

2 P a g e 1 Table f Cntents Backgrund t the relief What are the benefits fr small cmpanies Meaning f R&D fr tax purpses Categries f qualifying csts Other cnsideratins Preparing and supprting the claim

3 P a g e 2 What are the benefits fr small cmpanies? Enhanced 230% tax deductin fr unfunded eligible R&D expenditure under the SME regime This prvides additinal tax relief f 2,470 per 10,000 f qualifying expenditure if paying crpratin tax at the current rate f 19%. An alternative cash credit is available fr lss making SMEs f 14.5%, this is currently wrth 3,335 per 10,000 f qualifying expenditure. Accelerated 100% tax deductins fr capital spend Tw year time limit fr submissin f R&D claims

4 P a g e 3 The meaning f R&D fr tax purpses Fr a prject t be eligible as R&D fr tax purpses, tw key criteria must be met: It must seek t achieve a scientific r technlgical advance AND a reslutin f a scientific r technlgical uncertainty The R&D prject starts when wrk t reslve the technlgical uncertainty is identified and ends when the uncertainty is reslved r the prject is terminated An R&D prject des nt have t be successful t qualify Decisin n whether there is technlgical uncertainty is determined by the judgement f a cmpetent prfessinal

5 Scientific r technlgical advance P a g e 4 An investigatin that leads t increased scientific r technlgical knwledge A prject t create a new prduct r prcess An appreciable imprvement t an existing prduct r prcess Imprvements based n a cmpletely new applicatin f technlgy Imprvements based n the adaptatin f technlgy int anther area Advance thrugh systems engineering with the integratin f tw r mre elements that have never previusly perated tgether

6 Scientific r technlgical uncertainty P a g e 5 It is unclear t a cmpetent prfessinal if the advance is scientifically r technlgically feasible Smething has been demnstrated as scientifically r technlgically feasible but it is unclear hw t achieve the advance Technlgical uncertainty It is nt readily deducible t a cmpetent prfessinal whether it is pssible t alter the cmpnents f a cmplex system withut disrupting the system as a whle A cmpetent prfessinal wuld nt knw hw t prceed with cnfidence

7 Categries f qualifying expenditure P a g e 6 Bradly qualifying expenditure includes the fllwing:- Staffing csts including staff invlved in supprt activities and prject management may include time spent n capital prjects where this time is expensed Externally prvided wrkers Sftware and cnsumable items includes materials emplyed directly in R&D trials Certain subcntract payments

8 Staffing csts P a g e 7 Wages, salaries, bnuses and ther cash payments made t emplyees and directrs Als emplyer s NI and pensin cntributins Must be emplyees f claimant cmpany Include prprtin f csts that relate t time spent directly and actively engaged in R&D activity

9 Externally prvided wrkers P a g e 8 Payments t third parties fr the prvisin f persnnel t wrk with the cmpany s teams Persnnel must be wrking under the supervisin, directin r cntrl f the cmpany Claim 65% f payments made Reduce if nly wrking directly and actively n R&D fr part f the time If third party is a cnnected cmpany, claim n lwer f: Amunt paid, r Staff csts incurred by third party

10 P a g e 9 Sftware & cnsumable items Materials and equipment must be directly emplyed in the R&D prcess Cnsumable r transfrmable materials, e.g. Prttypes Output frm prductin trials Frmulatins/ingredients used in tests Water, fuel and pwer Materials, chemicals r cmpnents Sftware (specialist & general) emplyed directly in the R&D can apprtin if nt fully used in R&D

11 P a g e 10 Subcntract csts Transfer f respnsibilities with respect t a particular task t a third party e.g. testing Under the SME scheme, all subcntracted csts can be claimed regardless f whether the claiming cmpany wns the IP resulting frm the R&D Hw much t claim

12 Other cnsideratins P a g e 11 The activities must relate t Relevant R&D The csts must be deductible in calculating taxable prfits The csts must nt be cnsidered capital fr tax purpses, but may have been capitalised in the cmpany s accunts The cmpany des nt need t wn the resultant IP The cmpany must be a ging cncern

13 Preparing and supprting a claim P a g e 12 The key t success is demnstrating t the Revenue fficer that: There are clear reasns why the prject is eligible withut cnfusing r versimplifying the facts: When did the eligible prject start and end Was this prject genuinely seeking a technlgical advance What were the technlgical uncertainties What activities were undertaken t reslve technlgical uncertainties during the perid being claimed and why they were needed t reslve the technlgical uncertainties The right peple have been invlved with the preparatin f the claim The guidelines have been understd and applied apprpriately Only qualifying csts have been included in the claim