The Northern Ireland Corporate Tax Office (NIrCTO), David Stewart
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The Northern Ireland Corporate Tax Office (NIrCTO), David Stewart

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Presentations from Horizon 2020 Information Seminar held at Hilton Hotel 28th November 2013

Presentations from Horizon 2020 Information Seminar held at Hilton Hotel 28th November 2013

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The Northern Ireland Corporate Tax Office (NIrCTO), David Stewart The Northern Ireland Corporate Tax Office (NIrCTO), David Stewart Presentation Transcript

  • The Northern Ireland Corporate Tax Office (NIrCTO) David Stewart
  • Aims To help promote NI: • Inward investment • Local expansions • Research & Development Tax Relief Northern Ireland Corporate Tax Office | 2
  • R&D Tax Relief - Brief overview • Relief for qualifying revenue expenditure on R&D. • Where a project seeks to achieve an advance in science or technology • Which is not readily available or deducible by a competent professional working in the field. • Must be an advance in overall knowledge or capability in the field – not just the company’s own state of knowledge or capability. • (100% RDA’s are available for capital expenditure). Northern Ireland Corporate Tax Office | 3
  • Further considerations • Focus on the advance being achieved and not the industry or product aspiration, specification or design. • Involve the R&D staff in the process. Northern Ireland Corporate Tax Office | 4
  • Possible commercial project time line – defining R&D for tax purposes Northern Ireland Corporate Tax Office | 5
  • R&D tax Relief - How the relief works The level of relief available depends upon which R&D relief scheme a company falls within. • The small or medium company (SME) scheme - enhanced deduction of 225% of the company’s qualifying expenditure. (Previously 200% up to 31 March 2012). 11% repayable credit for R&D losses • The large company scheme - enhanced deduction of 130% of the company’s qualifying expenditure. No repayable credit for R&D losses. • New 10% research & development expenditure credit (Above The Line credit) - introduced from 1 April 2013 for large companies. Northern Ireland Corporate Tax Office | 6
  • SME or Large Pre 1 August 2008 Post 1 August 2008 < 250 Employees < 500 Employees and and Annual turnover not exceeding €50m Annual turnover not exceeding €100m or or Balance sheet totalling no more than €43m Balance sheet totalling no more than €86m This extended post 1 August 2008 definition is for R&D Tax Relief purposes only. Northern Ireland Corporate Tax Office | 7
  • Qualifying R&D expenditure Is expenditure on: • Staffing costs (CIRD83000/83200) (includes salary costs, bonuses, employers NIC, pension contributions, but no benefits in kind). • Consumable items (CIRD82300/82400) (Includes water fuel and power) • Software (CIRD82500) (revenue expenditure on software directly employed in R&D activity) • Externally provided workers (CIRD84000/84100) (If unconnected, 65% of the expenditure qualifies) • Subcontracted R&D (CIRD84200) (If unconnected, 65% of the expenditure qualifies) • Contributions to independent research (Large Scheme only) (CIRD82200) Northern Ireland Corporate Tax Office | 8
  • Grants & Subsidies (Main Principles) SME Scheme • Grants & subsidies are deducted and the R&D claim is made on net allowable expenditure. (If grants are Notified, no claim is possible under the SME scheme, but you may still make a claim under the Large scheme or ATL credit). Large Company Scheme • Grants & subsidies are not deducted and the R&D claim is made on gross allowable expenditure. Note - The grant receipt is taxed under the normal taxing provisions. - Grant receipts are not conclusive evidence of R&D for tax purposes and do not necessarily correlate to the qualifying R&D expenditure. Northern Ireland Corporate Tax Office | 9
  • Grants – practical examples A Ltd a SME spends £100k on qualifying R&D with a £40k subsidy which is a notified state aid (to include ‘Grant for R&D’ etc): • R&D Costs £100,000 • Less funding £ 40,000 • Net project cost £ 60,000 No Claim Under SME scheme BUT can claim under Large scheme R&D tax relief £100,000 @ 30% = £30,000 Tax saved enhanced exp £ 30,000 @ 23% = £ 6,900 Plus accounts deduction £100,000 @ 23% = £23,000 Total tax saved £29,900 Northern Ireland Corporate Tax Office | 10
  • Grants – practical examples A Ltd a SME spends £100k on qualifying R&D with a £40k subsidy which is not a notified state aid (to include Horizon 20:20): • R&D Costs £100,000 • Less funding £ 40,000 • Net project cost £ 60,000 R&D SME tax relief £ 60,000 @ 125% = £75,000 Plus R&D Large tax relief £ 40,000 @ 30% = £12,000 Tax saved enhanced exp £ 87,000 @ 23% = £20,010 Plus accounts deduction £100,000 @ 23% = £23,000 Total tax saved £43,010 Northern Ireland Corporate Tax Office | 11
  • How R&D Relief is claimed • In full company tax return at end of accounting period. • Outline of the project • Outline the scientific or technological uncertainties to be resolved. • Detail the allowable costs on direct resolution. • Backdated claims possible (within the anniversary of the filing date – generally 2 years after the end of the accounting period). Northern Ireland Corporate Tax Office | 12
  • A SME practical example Costs Allowable R&D staff (x3) with total costs £150,000 and 80% of time directly on R&D £150,000 x 80% allowable as staff costs £120,000 R&D Manager’s costs £100,000 with 20% of time directly managing the R&D activity £100,000 x 20% allowable as staff costs £20,000 Heat & light £5000 with 25% consumed in R&D project £5,000 x 25% as consumable items Disposable laboratory equipment consumed £200 £200 as consumable items £80,000 payments to an unconnected subcontractor for specific R&D work 65% of payments allowable as subcontracted R&D £80,000 x 65% = £52,000 £70,000 payments to unconnected staff provider for staff directly engaged on R&D 65% allowable as an externally provided worker £70,000 x 65% = £45,500 Total qualifying expenditure Qualifying Expenditure £1,250 £200 £238,950 SME Scheme enhanced expenditure £238,950 x 225% £537,638 claimed at Box 101 on CT 600 SME Scheme enhanced R&D Relief @ 225% £238,950 x 125% Additional deduction due £298,687.50 Northern Ireland Corporate Tax Office | 13
  • Help and Further Information  R&D - HMRC website at: http://www.hmrc.gov.uk/ct/forms-rates/claims/randd.htm  The HMRC Corporate Intangibles and Research & Development (CIRD) Manual at: http://www.hmrc.gov.uk/manuals/cirdmanual/CIRD80000.htm  Croydon R&D Specialist Unit Tel 03000 511811  Manchester R&D Specialist Unit Tel 03000 511811 Northern Ireland Corporate Tax Office | 14
  • www.hmrc.gov.uk/nircto/invest-in-ni.pdf Northern Ireland Corporate Tax Office | 15
  • The Patent Box • • • • • Context What is it? Overview of main conditions What profits qualify? Questions Northern Ireland Corporate Tax Office | 16
  • Patents and R&D Northern Ireland Corporate Tax Office | 17
  • What is it?  Allows limited companies to tax qualifying profits earned from its qualifying patents or patented inventions at 10%)  Phased in from 1 April 2013 with full benefit by 2017  An optional regime so companies must elect in – No special form. Northern Ireland Corporate Tax Office | 18
  • Main conditions  Company must hold a qualifying UK or EPO patent or an exclusive licence to develop such rights. Limited other EEA jurisdictions also apply.  Regime also applies to rights similar to patents relating to human and veterinary medicines, plant breeding and plant varieties.  Development Condition – the company must have created or significantly developed the patented invention.  Active Ownership Condition - for group’s, the company must have either developed the IP itself or be actively managing it. Northern Ireland Corporate Tax Office | 19
  • What profits qualify? 1. Sales of the patented item or items incorporating it 2. Royalties from licensing 3. 4. Sales of qualifying patented rights Infringement income And: 5. Using a patented process to produce non patented items 6. Notional Royalty Using patented items to provide a service Northern Ireland Corporate Tax Office | 20
  • The Patent Box Profits Corporation Tax Profits 10% tax 23% tax 23% tax 23% tax 23% tax 23% tax 23% tax 23% tax 23% tax Northern Ireland Corporate Tax Office | 21
  • Marketing Asset Return - Brands  This adjustment aims to exclude the sometimes very substantial profits generated by established brands and to arrive at profit attributable to patents.  Simplifications:  If brand profit is less than 10% of the profit remaining after deducting the routine return, then there is no need to make an adjustment.  Special treatment for “small claims”. Northern Ireland Corporate Tax Office | 22
  • Help and Further Information  HMRC website at: http://www.hmrc.gov.uk/ct/forms-rates/claims/patent-box.htm  The HMRC Corporate Intangibles and Research & Development (CIRD) Manual at: http://www.hmrc.gov.uk/manuals/cirdmanual/CIRD200000.htm  The Croydon R&D Specialist Unit Tel 03000 511811  And finally… Northern Ireland Corporate Tax Office | 23
  • The Northern Ireland Corporate Tax Office (NIrCTO) www.hmrc.gov.uk/nircto/index.htm Tel 03000 599 000