Can I claim R&D Tax Credits?

I recently attended a tax update course and the lecturer was very enthusiastic about R&D tax credits and the regime to positively encourage investment through the taxation system.  Costs specific to a qualifying project are eligible for 200% tax relief so if you spend £20k you get £40k set against your taxable profits.  As will be apparent for such a beneficial treatment the conditions are quite onerous, but well worth looking into if you have a project which may qualify.

Does my project qualify for R&D Tax credits?

1. The project can only qualify if there is
   • not a “readily deducible” solution
   • there is “uncertainty” that it can be completed
   • it will need to be “worked on” for the solution to be reached
   • Under self assessment it is up to the taxpayer to decide whether the project qualifies so there should be a clear paper trail should you wish to claim
   • The advice from the HMRC R&D helpline was to see if there were people in the field and get their opinion on whether
   1. there is a solution available commercially
   2. if so, if there is any doubt that it can be done
   3. provided the research can be

What can I claim R&D tax credits for and how do I claim?

1. Any internal revenue expenditure associated with the project
2. If you use subcontractors you can only claim 65% of their costs for tax credit purposes.  This means you will only get 130% tax relief
3. Relief for capital expenditure should be claimed via the usual capital allowances regime
4. R&D tax credits can only be claimed against corporation tax so are only available to limited companies and Plc’s
5. The relief is claimed either by the corporation tax return or separate letter if that has already been submitted
6. You should be able to prove that the project is R&D and keep detailed summary of expenses

This article is only a summary of the main issues to consider and there may be other conditions which apply to your situation so please seek professional advice before taking any steps based on the information shown. If you would like advice in this or other areas feel free to call.  Alastair Wood, AW Accounting, Gravesend, Kent – Accountants who “speak your language”