How you could benefit from valuable Tax Relief for Research and - - PowerPoint PPT Presentation
How you could benefit from valuable Tax Relief for Research and Development Your complimentary webinar from Coastal Group Thank you for joining Advise | Assist | Answer Your Questions Hosted by: Neil Jones, Marketing Manager - Coastal
How you could benefit from valuable Tax Relief for Research and Development Your complimentary webinar from Coastal Group Thank you for joining Advise | Assist | Answer Your Questions
Hosted by:
Speakers:
Advise | Assist | Answer Your Questions
TAX RELIEF FOR EXPENDITURE ON RESEARCH AND DEVELOPMENT
Richard Tyler PKF Francis Clark LLP
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OVERVIEW
▪ Why make a claim for R&D tax relief? ▪ What is R&D for tax purposes? ▪ Examples of possible R&D activities ▪ Can you claim?
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OVERVIEW
R&D tax credits are a tax relief designed to encourage greater R&D spending. They work by either reducing a company’s liability to corporation tax or by making a payment to the company.
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OVERVIEW
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OVERVIEW
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OVERVIEW
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WHY MAKE A CLAIM FOR R&D TAX RELIEF
▪ For SMEs: An additional tax deduction of 130%
▪ For loss-making SMEs: Surrender R&D losses in return for cash payment from HMRC of 14.5% of the enhanced R&D costs ▪ For large companies: Effective tax savings of 9.72% of R&D expenditure under the RDEC scheme
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“A project which seeks an advance in science
contribute to achieving this advance through the resolution of scientific or technological uncertainties”
WHAT IS R&D FOR TAX PURPOSES?
R&D – GOVERNMENT GUIDELINES
science or technology
which incorporates or represents an increase in overall knowledge or capability in a field of science or technology
material, device, product or service through scientific or technological changes
existing process, material, device, product or service in a new or appreciably improved way (e.g. a product which has exactly the same performance characteristics as existing models, but is built in a fundamentally different manner)
R&D – SOFTWARE DEVELOPMENT
meaningful changes that optimise the functions of the software
have pre-installed Operating systems like mobile phones and tablets among others
engineering and coding
systems
data with newly developed coding
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WHAT IS R&D FOR TAX PURPOSES
R & D – SME OR RDEC?
SME
(except some circumstances)
relation to the project
(the totals above are for the whole group of companies, part time staff are apportioned)
Where the above criteria are not met a claim under the RDEC scheme can be made, except for the going concern condition. The company must be a going concern to also claim under the RDEC scheme.
QUALIFYING EXPENDITURE
Pension Contributions, Reimbursed Expenses
includes power, heat and light
connected parties).
The above costs are those only in relation to the R & D and a just and reasonable percentage is usually applied where timesheets are not kept or for example apportioning software only partly used in a project. HMRC do not usually accept 100% of someone's time is in relation to R & D as there are periods throughout a project whereby other tasks are undertaken and some are standard and not R & D. All of the above expenditure must either be in the P & L during the year of the claim and/or an intangible fixed asset and fall into one of the above categories. *Restricted under the RDEC scheme
QUALIFYING EXPENDITURE
Watch out for:
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R&D AND GRANTS
Expert advice at the grant application stage can help avoid unnecessary future restrictions on the availability of R&D tax relief ▪ Not mutually exclusive – it is possible to receive grant funding and make a claim for R&D tax credits ▪ Consider three separate scenarios and their effect on the availability of R&D tax relief:
▪ Non-project specific grant (notified state aid) ▪ Project specific grant (notified state aid) ▪ non-state aid grant
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R&D AND GRANTS - EXAMPLES
Non-project specific grant (state aid) Project specific grant (state aid) Non-state aid grant Costs qualifying for relief under the SME R&D tax credits regime £nil £100,000 £150,000 Costs qualifying for relief under the RDEC scheme £200,000 £100,000 £50,000 Tax benefit of claim for R&D relief £19,440 £42,720 £54,360
QUALIFYING EXPENDITURE
Watch out for:
CAPITAL EXPENDITURE
Research & Development Capital Allowances (RDAs) 100% FYA Available on buildings used for the R & D
EXAMPLE 1 – WIDGET LTD
Research & Development Costs: £100,000 £ £ Profit Before Tax 200,000 200,000 Plus: Depreciation 1,000 1,000 Disallowable Expenses 1,000 1,000 Less: Capital Allowances (500) (500) R & D (SME SCHEME) (130,000) PCTCT 201,500 71,500
Company is profit making and claiming under SME scheme.
EXAMPLE 1 – WIDGET LTD
£ £ PCTCT 201,500 71,500 Tax at 19% 38,285 13,585 Corporation Tax Saving of:
EXAMPLE 2 – GADGET LTD
Research & Development Costs: £100,000 £ £ Profit Before Tax 50,000 50,000 Plus: Depreciation 1,000 1,000 Disallowable Expenses 1,000 1,000 Less: Capital Allowances (500) (500) R & D (SME SCHEME) (130,000) PCTCT 51,500 (78,500)
Company is loss making and claiming under SME scheme.
EXAMPLE 2 – GADGET LTD
£ £ PCTCT 51,500 (78,500) Tax at 19% 9,785
11,383 Corporation Tax Saving of:
EXAMPLE 3 – GIZMO LTD - RDEC
Research & Development Costs: £100,000 £ £ Profit Before Tax 200,000 200,000 Plus: Depreciation 1,000 1,000 Disallowable Expenses 1,000 1,000 RDEC Credit 13,000 Less: Capital Allowances (500) (500) PCTCT 201,500 214,500
Company is profit making and claiming under RDEC scheme.
EXAMPLE 3 – GIZMO LTD - RDEC
£ £ PCTCT 201,500 214,500 Tax at 19% 38,285 40,755 RDEC CREDIT (13,000) Tax payable at 19% 27,755 Corporation Tax Saving of:
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EXAMPLES OF RECENT SUCCESSFUL CLAIMS
standard products in confined locations
in legislation/regulation
CAN YOU MAKE A CLAIM?
you use technology to improve your products or processes?
technology not just your company’s
knowledge?
grant funded, or if you are undertaking R&D for a customer
accounting period in which the qualifying costs were incurred in which to make a claim via the company’s corporation tax return
Question & Answer Session:
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PKF Francis Clark is a trading name of Francis Clark LLP. Francis Clark LLP is a limited liability partnership, registered in England and Wales with registered number OC349116. The registered office is Sigma House, Oak View Close, Edginswell Park, Torquay TQ2 7FF where a list of members is available for inspection and at www.pkf-francisclark.co.uk Francis Clark LLP is a member firm of the PKF International Limited network of legally independent firms and does not accept responsibility or liability for the actions
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