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R&D Tax Relief
25th June 2014
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•Benefits of the R&D Tax Relief Schemes
•What is R&D for Tax Purposes?
•Categories of Qualifying R&D Expenditure
•Potential Lost Opportunities
Areas to be covered
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Benefits of the R&D Tax Relief Schemes
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Enhanced R&D Tax Deduction• Extra (>100%) tax deduction for companies on total volume of qualifying revenue R&D expenditure
SME scheme:
- 75% enhanced tax deduction prior to 1 April 2011
- Increased to 100% from 1 April 2011
- Increased to 125% since 1 April 2012
Large company schemes:
- 30% enhanced tax deduction
- “Above the line” R&D expenditure credits introduced for expenditure incurred since 1 April 2013
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Tax Free Cash Receipt• Actual tax free cash receipts may be claimed
SME scheme – Loss making companies:
- Approximately 25p in the £ prior to 1 April 2014
- Increased to approximately 33p in the £ since 1 April 2014
PAYE/NIC cap was removed for accounting periods ending on or after 1 April 2012
Large company schemes – Companies without an outstanding tax liability:
- Approximately 8p in the £ since 1 April 2013
PAYE/NIC cap applies under large company schemes
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Tax Free Cash Receipt (cont.)•Hence, for expenditure incurred since 1 April 2013 ALL companies can potentially claim actual tax free cash from HMRC. This includes:
- Large companies;
- SMEs who have received grant funding; and
- SMEs who are carrying out R&D activities for another qualifying person
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What is R&D for Tax Purposes?
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• Has your company, or a company you act for:
Developed a new or improved product or process (or attempted to) during the last few years?
If the answer is yes (or maybe), the company could have undertaken qualifying R&D activities
• To qualify the work should be a:
- Puzzle
- Conundrum
- Challenge
- Problem
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Categories of Qualifying R&D Expenditure
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1. Staffing costs
2. Contracted out R&D activities
3. Externally Provided Workers (for instance, agency workers)
4. Consumables
5. Computer software
6. Power, fuel and water
7. Payments to the subjects of clinical trials
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Potential Lost Opportunities
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• Not realising the company is undertaking qualifying R&D activities
• Not realising certain projects and/or activities qualify as R&D for tax purposes
• Believing the receipt of a grant prevents the company from making an R&D claim
• Believing the receipt of a grant by an SME prevents the company from making an R&D claim under the SME scheme for any of its activities
• Not claiming R&D relief for certain activities that might be deemed to be production by some
• Not claiming relief for Qualifying Indirect Activities
• Not making a claim on the basis it is thought that it would be too onerous a process
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