HM Revenue and Customs tax relief presentation from 24 June 2014 Innovation Network event in Cardiff

1. An Introduction to
Research and Development (R&D)
Tax Relief

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This Presentation Will Cover
• Benefits of the Scheme – What’s in it for me?
• Do I Qualify?
• RDA (for Capital expenditure)
• How it works?
• Definition of R&D
• What is an ‘advance’?
• Qualifying Expenditure
• Complex Issues
• Patent Box
• Further Help

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Benefits – What is in it for me?
• Tax Credits – Money Back
• 28 day turnaround – helping cash flow
• Payments on account
• R&D unit – helping you get it right

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Does my company qualify?
• Must be a company for Corporation Tax.
http://home.inrev.gov.uk/cirdmanual/CIRD81200.htm
• A SME http://www.hmrc.gov.uk/ct/forms-rates/claims/randd.htm#1
• Have an R&D project related to the company’s trade or trade the
company intends to carry on.

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Research & Development Allowance (RDA)
• The RDA gives relief for capital expenditure incurred on R&D directly
undertaken by a trader
• R&D tax credits are not available on capital expenditure.
• Allowances are only due if the R&D is related to the trade carried on
• The rate of allowance is 100%

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R&D Tax Credits - how do they work?
• Claimed through company tax return
• Time Limits – 2 years from end of AP
• Additional £1.25 deduction for every £1 spent on R&D
• Reduces Corporation Tax for profit making companies
• A cash refund now of just under £2,500 for £10k qualifying expenditure

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The Definition of R&D
A project that seeks to achieve an advance in science or technology
(not arts or humanities)
through the resolution of scientific or technological uncertainties
For the definition of R&D see HMRC website
http://www.hmrc.gov.uk/manuals/cirdmanual/cird81900.htm

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What is an advance?
• Must represent an advance in the
overall knowledge or capability in a
field of science or technology
• Not a company’s own state of
knowledge or capability alone
• Must not be readily deducible to a
competent professional

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Qualifying Expenditure
• Staffing costs
• Consumable items
• Subcontract costs
• Externally provided workers

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More Complex Issues
For example
• Grants or subsidies
• Acting as a subcontractor
• Subcontracting or Externally Provided Workers
Please speak to an R&D Specialist or contact your local office.

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The Patent Box
• Commenced from 1 April 2013
• 10% corporation tax rate on profits attributed to
patents
• UK, EPO & certain other patents and exclusive
licences
• Must meet Development and Active Ownership
Conditions
• Profits from a wide range of worldwide income:
licensing; patented products and services
• Applies to profits after deducting a routine return on
certain costs and a marketing profit if applicable
For further details
http://www.hmrc.gov.uk/manuals/cirdmanual/CIRD
200000.htm

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Where to get help
GOV.UK Website www.gov.uk (use R&D in the search facility)
R&D information
http://www.hmrc.gov.uk/ct/forms-rates/claims/randd.htm
R&D and Patent Box Webinar
https://www3.gotomeeting.com/register/259837982
Contacting your local HMRC R&D unit
http://search2.hmrc.gov.uk/kb5/hmrc/contactus/view.page?record=Pvzq8v3IoTM