R&D tax credits: Don’t let test tube imagery put you off

 

My colleague, Rachel Marsdin, presented on the subject of Research and Development (R&D) tax relief to the Lancaster ICT Cluster meeting at InfoLab21 last Thursday night (12th May).

 

The presentation received great feedback from those in attendance with some real examples given to highlight the extent to which this relief can assist businesses carrying out research and development activities.

 

Examples included:-

 

  • Research into cooking takeaway foods
  • Mechanism on display unit
  • Ventilation systems for animal transporters
  • Protective clothing for motorbikes
  • Software for submarines
  • Software for search engine optimisation

A key message being:- “Don’t let the test tube imagery put you off!”

 

 

 

What is Research and Development?

 

– Resolution of a technical or scientific  uncertainty

 

– Application of existing technical or scientific knowledge in a new and unusual manner

 

It is the project which is R&D and each project has to be assessed individually however several projects can attract relief at the same time.

 

Following the recent budget the headlines are as follows:-

 

Legislation will be introduced in Finance Bill 2011 to;

 

-increase the additional deduction for SMEs to 100 per cent of qualifying R&D expenditure (giving a total deduction of 200 per cent); and

 

Legislation will be introduced in Finance Bill 2012 to;

 

– increase the additional deduction for SMEs to 125 per cent of qualifying R&D expenditure (giving a total deduction of 225 per cent);

 

– abolish the rule limiting the payable R&D tax credit to the amount of PAYE and NICs paid;

 

– abolish the £10,000 minimum expenditure condition (for all companies); and

 

– change the rules governing relief for work done by subcontractors under the large company scheme.

 

Subject to obtaining State Aid approval, and to further consultation in some instances, the Finance Bill 2011 measures are expected to apply from 1 April 2011 and the Finance Bill 2012 measures are expected to apply from 1 April 2012.

 

A response will be published very soon following consultation on R&D tax credits and in light of the recommendations of the Dyson review.

 

This is a key area that we discuss with clients and if you require any further information please contact Rachel Marsdin.