R&D Tax Relief

Don’t imagine that Research and Development tax relief is only available for laboratory-type innovations.

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Research & Development Tax Relief

Why aren’t you applying for this under-subscribed and generous tax relief if your business is contributing to the advance of science and technology? Don’t imagine that Research and Development tax relief is only available for laboratory-type innovations.

It can apply to business expenses where new technologies, materials, knowledge, and ideas are being used to surmount old challenges and tackle some new ones.

Research & Development – Capital Expenditure:

Enhanced capital allowances can be claimed for capital expenditure on research and development. Allowances are only due if the R&D is related to the trade of the business. The allowance is known as the Research & Development Allowance (RDA) and qualifying expenditure attracts capital allowances of 100%.

Research and Development Tax Relief

Stipulations to qualify for R&D Tax Relief

Method of Relief

From 1 April 2015 businesses can claim R&D tax relief of 230% incurred. For expenditure incurred between 1 April 2012 and 31 March 2015, companies could claim 225%. Prior to that, they could claim relief of 200%.

Normally R&D tax relief would be claimed by deducting from taxable profits in the company’s corporation tax accounts, an additional amount equal to 130%, 125%, or 100% of the R&D expenditure, depending on when it was incurred.

A relief at 230% of the expenditure gives businesses liable for the small profits rate of corporation tax at 20% (2016), 19% (2017), a tax saving equal to 46% of the R&D expenditure. That means every £100 you spend of research and development is equal to £33 of tax relief.

Companies that incurred R&D expenses before they started to trade can treat the R&D relief as a trading loss. Again, the rules have changed slightly recently, but here’s another example.

What can R&D include?

R&D according to HMRC is when a project, or a component of a larger project, seeks to achieve an advance in science or technology. This could include:
  • Software development
  • Designing new products
  • Precision engineering
  • Products using new materials
  • Enhancing existing products or technologies
What does R&D Include

What part of the process will R&D expenditures cover?

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