Presentation by Alastair Cameron, Principal Consultant, Glentarn Consultants Ltd at the Funding - Liverpool City Region SME workshop on Thursday 7 February 2019 at The Accelerator, Liverpool

1. RESEARCH & DEVELOPMENT
TAX CREDITS
Alastair Cameron
Glentarn Consultants Ltd / ibd Business Advice Group N West & N Wales

2. R&D Tax Credits - History
■ Introduced by Labour Government in 2002 to promote innovation
■ 2010 Review for coalition led by Sir James Dyson
– Concluded that credits were essential to help promote innovation & growth
■ Several enhancements have been made over the years
■ Focus on schemes for SMEs; Large Company scheme exists but lower %
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3. What is it Worth?
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Sources. R&D Tax Reports published by HMRC Sept 17 , Values for complete UK
Year Number of Claims Total Value
2014/15 30,000 £1.32Bn
2015/16 37000 £1.75Bn
2016/17 34000 £1.84Bn
2015/16 310 Merseyside Companies claimed approx. £10M
1045 Greater Manchester Companies claimed £50M
The 2016/17 regional data is late!!
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4. Rules?
■ Must be an SME
– <500 staff
– Turnover< €100M
– Balance Sheet Value < €86M
■ Must be an advance in Science/Technology
■ Must take the financial risk
■ Must be some uncertainty about the outcome – needs some testing or validation
■ Not now necessary to own the IP (2012)
■ Can reduce Corporation Tax payable or get cash payments from HMRC if not profitable
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5. Making a claim
■ Calculate Qualifying Expenditure
■ Prepare a technical justification
– Why is it better than what has gone before?
– Why is it difficult?
– May not be examined on submission, but vital if
questioned.
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6. What Costs Qualify?
■ Detailed rules on qualifying costs are a bit complex
■ Staffing costs, consumable costs, software, subcontractors (%) and research
contributions etc. etc.
■ Largest area of activity claiming credits is writing software.
■ The more you do in-house the higher the claim
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■ Claims can be back-dated 2 years (HMRC can go back 6 years to review!)
■ Claims can be resubmitted if under-stated first time
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7. Personal Experience - Workplace Drug Testing
▪ Developing new process to allow confirmation of levels of many drugs in single run.
▪ Claimed about £100k in costs; start-up so not revenue generating
▪ Received approx. £14.5k in bank account in 6 weeks!
▪ Missed some allowable development costs, + project planning, + equipment
assessment
▪ Didn’t know we could claim for software bridge between lab & accounts systems
▪ Took me 4+ days to complete with some charged input from accountants.
• Claim could have been over £200k, with payment approaching £30k.
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BUT
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8. Case Study Examples
■ Bailiffs
– App to enable bailiffs to access files including photographs of individuals via
Smartphones & Tablets to minimise issues and improve cash collection rates.
■ Brewers
– Innovative small/new breweries developing new products and processes.
■ ICT
– Processes to transform and improve business & commercial operations.
■ Construction
– Roofing supplier developing and validating designs for panelised systems which
enables on-site assembly by non-specialist trades.
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9. Examples
24/5/2016 9
Year to 31st March 2016
Qualifying Expenditure (QE) 50,000£
Profit for CT (before R&D) 100,000£
R&D enhancement (130%) 65,000-£
Adjusted profit 35,000£
CT saving at 20% tax rate 13,000£
Year to 31st March 2016
Qualifying Expenditure (QE) 50,000£
Profit for CT (before R&D) 80,000-£
R&D enhancement (130%) 65,000-£
1. Adjusted loss 145,000-£
2. Enhanced R&D (QE*230%) 115,000£
Tax credit on lower of 1. & 2. 16,657£
Loss surrendered for tax credit 115,000£
Loss remaining to carry forward 30,000£
Payment (14.5% of £115K) £ 16657
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Note: CT rates have changed since this example!

10. Common Misconceptions
■ Projects start at the earliest point of discussion, not when
development work starts
■ Claims from unsuccessful projects are valid.
■ Costs continue to be allowable until the uncertainty is
resolved
– Testing Successfully completed
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11. What next?
■ Have you any projects/plans which might qualify as R&D, have you
had such in the last 2 years, or do future plans involve R&D?
■ If you’ve not claimed before do a quick estimate of what you think the
costs might be. If it’s a significant sum consider seeking help to
maximise the value and save your time.
■ If you have claimed before and are now consider seeking help.
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12. QUESTIONS?
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Alastair Cameron
07771 314076
alastair@glentarn.net