• SMEs can deduct an additional 125% of qualifying expenditure for tax purposes.
• If the deduction creates a loss it may be surrendered in return for a cash payment from HMRC = 11% of the surrendered amount.
• If surrendered in return for cash, the loss cannot also be carried forward for future relief.
NOTE: If you have trading losses they are likely to restrict the cashback relief!
Qualifying R&D expenditure must be revenue expenditure on a project that seeks to achieve an
advance in science or technology that is relevant to the trade.
It can include expenditure on the following:
• staffing costs, including NIC (Class 1 and Class 1A) and pension contributions but excluding assessable benefits
• agency staff for R&D
• materials, water, fuel and power for R&D
• software directly used in R&D
• payments to subcontractors (Note that only 65% of this expenditure will be eligible for the enhanced tax credit).
It cannot include:
• contributions to other bodies for independent research
• expenditure covered by a grant or subsidy
Record keeping
Min. period is 6 years. However, in cases involving fraudulent or negligent conduct, the time limit is extended to 20 years after the end of the accounting period.
You must make any claim for R&D Relief in your Company Tax Return or amended return. The normal time limit for making your claim is 2 years after the end of the relevant Corporation Tax accounting period.
Summary from HMRC is here.
If you require further assistance, please get in touch with us.
