R&D for tax purposes takes place when a project seeks to achieve an advance in science or technology. The activities which directly contribute to achieving this advance in science or technology through the resolution of scientific or technological uncertainty are R&D. Certain qualifying indirect activities related to the project are also R&D.
There is a requirement that the R&D carried on by the company is either related a trade carried on by the company or from which it is intended that such a trade will be derived. R&D related to a trade includes any R&D which may lead to or facilitate an extension of the trade and medical research that has a special relation to the welfare of workers employed in that trade.
There are two schemes for claiming relief, depending of the size of the company:
• The Small or Medium-sized Enterprise (SME) Scheme
• The Large Company Scheme
What Expenditure Qualifies for Relief?
If the company and the project meet the necessary conditions, then tax relief can be claimed on the following items of revenue expenditure:
Staff Costs - This means the cost of employing staff directly who are actively engaged in carrying out R&D itself.
Externally provided workers and sub-contractors - This covers the cost of paying a staff provider for staff provided to the company, or a sub-contractor who are directly and actively engaged in carrying out R&D.
Consumable Items - These include consumable or transformable materials used directly in carrying out R&D.
Software - Revenue expenditure incurred on computer software employed directly in R&D.
Utility Costs - Power, water, fuel used directly in carrying out R&D, but not for instance telecommunication costs and data costs.
Enhanced capital allowances are available for capital expenditure on research and development. Allowances are only due if the research and development is related to the trade of the business. The allowance is known as the Research & Development Allowance (RDA) and qualifying expenditure will be eligible for capital allowances of 100%.
Let AGL help guide you through the process and help you make that claim with HMRC a success.
Obtaining Finance/Working Capital
Do you want to start that next project? Do you need finance? AGL Associates will give you the help and guidance to produce the reports for lenders to review so that obtaining finance is easier. AGL works with an array of banks and commercial brokers to give you the access to the people you need to speak to.
Business plans, financial forecasting and investor packs are all part and parcel of what we do, if you are also using cloud technology and have management accounts, we can get you access and answers from funders within hours not days.