Research and development tax relief – In a nutshell

Published on 9th April 2014

Research and development tax relief, In a nutshell – expert advice from Isobel Savage at Old Mill Accountants and Financial Planners.

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There’s a lot of talk about R&D tax relief, but you may still be wondering what it is and how it might apply to your business?

Effectively it’s a form of non competitive grant funding for companies undertaking R&D.

Its delivered through the tax system, by reducing tax payable or even generating a cash refund for loss making companies.

Basically if your company has spent money on qualifying R&D the relief is yours for the taking.

If you’ve got any doubts as to whether it’s worth looking in to, it might be worth noting that for an SME paying tax at 23%, your total tax saving would fund nearly 52% of your spend. Even smaller companies paying tax at the 20% rate will save 45% in total on qualifying costs. The idea of course is to ensure businesses keep on investing, in innovation and you can afford to do it with such a generous relief.
So the big question then is, “what counts as qualifying Research and development”
The tax definition states that where a project seeks to achieve, an advance in science or technology there is R&D. That still deters a lot of companies who think the work necessarily has to be hugely high brow. A key point to remember, is this relief doesn’t just apply to work undertaken by people in white coats in labs and clean rooms. We are looking for new products, materials, processes or systems or even an appreciable improvement to existing ones.

Can you identify a technological uncertainty; the problem your work is intended to overcome? Is it something a professional in the field couldn’t readily solve ? Are you trying to prolong the life of a product, make it lighterweight, replace an expensive material with an alternative whilst retaining the same qualities? Any of these could potentially qualify. Successful claims have involved businesses from the high tech to manufacturing, through to food businesses and software developers. The application of this relief is broad. Don’t miss out. Speak to your accountant.

Isobel Savage
Old Mill Accountants and Financial Planners
[email protected]
01392 351 313


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