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Research and Development (R&D). It's what other people do. Right?
The answer is, not necessarily. Many companies carry out R&D without realising that their activity could bring them within scope of the R&D tax regime.
There are two main R&D tax reliefs: Small and Medium- sized Enterprise (SME) R&D relief, and Research and Development Expenditure Credit. The first can provide an enhanced 130% deduction against taxable profits for qualifying R&D expenditure. The second is potentially available to larger companies, and SMEs in particular circumstances, allowing to claim a credit calculated at 13% of qualifying R&D spend.
In the latest news, qualifying R&D expenditure changes to include specific data and cloud costs from April 2023: license payments for datasets, an cloud computing costs attributable to computation, data processing and software.
Do I Qualify?
For tax relief, the activity must fall to be accounted for as R&D under generally accepted accounting practice and must also confirm to definitions set out in BEIS Guidelines. Qualifying projects are those aiming to make an 'advance in science or technology' through the 'resolution of scientific or technological uncertainty'.
There is increasing government concern about error and fraud in R&D claims. One way such error can arise, for example, is through the use of unregulated, so-called R&D 'specialist' firms.
From April 2023, claims will be made digitally in most cases, with additional detail given. With increased HMRC scrutiny on the horizon, it is more important than ever that claims are prepared professionally.
If you have not previously considered whether your company is involve in qualifying R&D, we should be pleased to explore the issue with you. Please do contact us for more information on this, or any other area relating to R&D.