Research & Development
Many potential claims are missed because companies do not realise that they are incurring eligible expenditure. R&D tax relief is a government incentive to encourage companies to invest in R&D activities by claiming relief on qualifying costs. The rates of relief are:
• 225% of the qualifying R&D costs may be claimed as a tax deduction by SMEs (200% for expenditure prior to 1 April 2012)
• 130% of the qualifying R&D costs for large companies
• In addition, SMEs may choose to 'trade in' their R&D losses and receive 25p for each £1 spent on qualifying R&D
• 100% allowances are also available on R&D capital expenditure
But what is eligible R&D? Eligible R&D is work that is undertaken to resolve scientific or technological uncertainty aimed at achieving an advancement in science or technology. 'Advancement' may be the creation of a new product or process, or the improvement of an existing one.
R&D does not need to be successful in order to qualify for the relief outlined above. As long as qualifying R&D has been undertaken then the relief is available. In addition, a company may qualify for the relief even in the situation where the work has been outsourced to a third party.