R&D is not restricted to the oft-cited life sciences, but covers companies in virtually every industry which are undertaking some form of innovation.
Industries for which we have successfully made claims include construction, resources, telecoms, and financial services as well as the more obvious manufacturing, energy, and life sciences industries. Software, internet and communications are good examples where R&D takes place in supporting functions as well as industries in their own right.
In the property sector, seeking to devise new methods of design and construction would potentially qualify, particularly in new energy saving developments. Sophisticated software is often developed to support construction methods (e.g. in the specification of steel), and for the sale and management of property.
Projects must seek to achieve (but not necessarily succeed) an advance in science or technology through the resolution of scientific or technological uncertainty. R&D may be undertaken even where similar development has been undertaken by a competitor but retained as a trade secret. There is inevitably considerable ambiguity in many cases, so that each case must be looked at on its own merits.
It is not necessary to have or seek any patents to claim R&D relief, but many companies will do so and be able to take advantage of the new 'patent box' reliefs which were introduced from 1 April 2013.
What's it worth?
Where a company is tax paying for the year ended 31 March 2013, the extra relief could be worth 31% of cost. Alternatively, where a company is loss making, the relief can give rise to tax repayments up to 25% of the cost, even where no corporation tax or PAYE/NIC (for periods ending after 31 March 2012) has ever been paid. This is of considerable assistance to start-ups in need of cash to fund their R&D.
To qualify for these levels of R&D relief, the company must have fewer than 500 employees, and either turnover not exceeding €100m, or balance sheet total not exceeding €86m – including certain associated companies.
A lower level of relief applies to larger companies, but from 1 April 2013, a repayable credit for lossmaking companies will become available.
Making claims
There are numerous other rules, and claims have to be made within two years of the end of an accounting period. HMRC gives no leeway here. It also has special R&D units who consider claims in detail, so it pays to prepare them carefully.
Acquisitive groups should check that their targets have not missed out, and consider claims before it is too late.
For more information and how we can help on R&D, please see www.smith.williamson.co.uk/uploads/publications/RD-tax-credits-April-13.pdf
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.