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Research and Development

For the past few years, the Government has publicly announced that it wants to be one of the leading innovative countries in the world, and to help support this, they have provided some very valuable tax reliefs to companies.  With West Cumbria being a rich source of innovative ideas in the nuclear sector, we believe that there is a unique opportunity for both Small and Medium sized Enterprises (SMEs) and those companies that are subcontracted to “large” Corporates to reap the benefits of the Research & Development (R & D) rules.

 

How to qualify

 

The key to identifying whether a company qualifies for R & D, or whether it is beneficial for a company to further pursue the review of whether R & D relief will be available, can usually be established through a brief conversation and some key questions.

 

Most notably, the key point to demonstrate is that your company has embarked on a project to advance science or technologyin a particular field.  If this can be demonstrated, or a company can demonstrate that it has been subcontracted to a large company as part of an overall project, then the R & D reliefs potentially come into play.

 

SME relief

 

If a SME embarks on the project itself, then the more advantageous reliefs are available.  The rules for an SME being that it can claim an additional 125% of the qualifying expenditure as additional relief.  A simple example is outlined below to demonstrate the benefits to a company of the SME relief.

 

 

No Relief Claimed

Relief Claimed

 

 

 

 

£

£

 

 

 

Profit before R & D expenditure

200,000

200,000

Qualifying R & D expenditure

(50,000)

(50,000)

Addition R & D Uplift (125%)

 

(62,500)

 

 

 

Taxable Profit

150,000

87,500

 

 

 

Tax Payable @ 20%

30,000

17,500

 

 

 

Tax Saving made by claiming the relief

£ 12,500

 

 

 

 

 

Subcontractors

 

Although a company cannot claim relief under the SME rules above if it is a subcontractor, in some cases the subcontracted company can claim R & D relief under the large company rules.  Unfortunately these rules aren’t as advantageous as the SME rules, but they are beneficial to the company none the less.

 

Similar to the SME rules, the company will qualify for an uplift in the qualifying expenditure, but the uplift is only at 30%.  A simple example is outlined below to demonstrate the benefits to a company of the large company relief.

 

 

No Relief Claimed

Relief Claimed

 

 

 

 

£

£

 

 

 

Profit before R & D expenditure

200,000

200,000

Qualifying R & D expenditure

(50,000)

(50,000)

Addition R & D Uplift (30%)

 

(15,000)

 

 

 

Taxable Profit

150,000

135,000

 

 

 

Tax Payable @ 20%

30,000

27,000

 

 

 

Tax Saving made by claiming the relief

£ 3,000

 

 

 

 

 

If you have any questions on the subject of Research and Development or to find out if you will qualify, please contact Brett Bennett, Technical Manager and R & D Specialist on 019467 25808 or email to brettbennett@robinsonco.co.uk

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