R&D Tax Relief & Planning

MSC R&D Paid-on-Results; Fast-Track Process; Expert Teams

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Don’t miss MSC R&D’s seminar on ‘How to navigate your way through the R&D funding landscape.’

Event: Leeds Business Week

Date: 11th October 2017

Time: 11.00 – 11.45

Location: Aspire, 2 Infirmary St, Leeds LS1 2JP

https://leedsbizweek.com/events-seminars/event-seminar/navigating-way-rd-funding-landscape/

Don’t waste your investment in Innovation – maximise your R&D Tax Relief

The UK Government’s R&D Tax Relief schemes encourage and reward both SME’s and large companies for investing in innovation. They offer a vital means to cut costs and improve cash flow, whilst still keeping ahead of the competition.

In addition to R&D Tax Credits and R&D Capital Allowances, companies can now also claim r&d tax relief via the Patent Box – aimed at companies looking to exploit patented innovations.

These schemes are complex and require detailed knowledge and understanding in order to take full advantage of them. This is why the majority of companies either don’t claim or under claim. Or, worse still, over claim with no justifiable evidence in the case of an audit by HMRC.

MSC R&D takes R&D Tax Relief applications to a new level. We match the right technical and financial expertise to your business, working with your existing accountant to achieve the maximum eligible benefit from R&D Tax Relief, whilst minimising your time commitment.

Operating on a contingency basis, with no set up fees, MSC R&D has been successfully preparing claims for R&D Tax Relief since its inception in 2000.

 

R&D Tax Credits Explained

Tax-Credits

The R&D Tax Credit scheme was introduced by the government for SMEs in 2000, and extended to Large Companies in 2002. Any limited company developing new products, technology or processes may be eligible.

It is a tax relief scheme, designed as an incentive for companies developing new technology – the more qualifying development work a company does, the greater the relief it can get from its Corporation Tax bill. Even loss making companies can benefit (in terms of a “Credit”) which can be of particular importance to early stage businesses.

The scheme is one of the most attractive in the world and a company can claim retrospectively for up to 2 previous accounting years.

The benefits to a company vary according to the level and cost of development undertaken, whether it is an SME or a Large Company, and its Corporation Tax band, but it is not unusual for claimed expenditure to run into hundreds of thousands of pounds, with tax relief typically in excess of £30,000 being realised.

It is possible for a company to prepare and submit its own claims. However in order to be sure that their claim is optimised and justifiable, the company must fully understand the detail of the HMRC guidelines (a 15-part manual) and have the time, financial and technical expertise to define, quantify and support their claim.

The alternative is to use a specialist like MSC R&D.

Download The MSC R&D Guide to R&D Tax Relief

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The Specialist Approach

The meaning of R&D in the context of R&D Tax Credits is not straightforward, and wider than most companies realise. It is not limited to the R&D department.

HMRC defines R&D as work that achieves a scientific or technological advance when scientific or technological uncertainty exists.

This can include:

  • achieving an increase in overall scientific or technological knowledge or capability
  • significantly improving products, processes, materials or services through scientific or technological development.
  • using science or technology to duplicate the effect of an existing product or process in a new or appreciably improved way.

The whole project may not qualify, only the element addressing the technological uncertainty. This is not always easy to identify but can include planning and managerial activities in some instances.

With software R&D, where development is ongoing, identifying the areas of technological uncertainty in projects is critical, as many more routine activities will not qualify.

Qualifying expenditure is not straightforward either, as there is a detailed rule base as to what qualifies and in what circumstances. In reviewing your claim, the HMRC will try to be helpful, but if you claim something to which you are clearly not entitled they may seek penalties.

This complexity is why many companies either don’t claim, or fail to claim all that they are entitled to. Claim documentation may also be technically weak and invite challenge by the HMRC.

A ‘specialist approach’ on the other hand, uses skilled financial and technical experts, and places the projects and technologies at the centre of the claim. This approach starts with the company’s technical people, talking to them in their own language, identifying all eligible projects and preparing robust claims.

This need not be particularly time consuming because it is a conversation between your technical specialists and ours, so we can quickly grasp the nature of the development and advise where the qualifying R&D occurs.

The expert market knowledge a specialist possesses can help to uncover additional qualifying expenditure. In our experience this can result in claims values being increased by up to 50%.

 


R&D Tax Relief – The MSC R&D Team Way

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Paid-onResults; Fast-Track Process; Expert Teams

MSC R&D has over 20 years’ experience in helping R&D technology companies deliver profitable growth through innovation. Our knowledge of and experience of the R&D process is unrivalled, as is our expertise in raising funding and maximising tax opportunities for our clients.

We have been successfully preparing claims for R&D Tax Credits since the scheme’s inception in 2000. Our ‘fast track blitz’ processes and methodologies minimise the impact on your time and obtain optimum results for you. Normally our analysts only require one day on site.

Our team of MSC R&D accredited qualified technologists and financial experts have specific experience across a wide range of sectors, meaning we can match the right technical expertise to your business and work with your technical people and accountant to achieve the maximum eligible benefit from R&D Tax Relief.

To support our claims, our in-depth analysis is compiled into a highly detailed report with a breakdown of your entire R&D expenditure. This report not only provides concrete evidence for your claim, but also acts as a valuable resource for project managers, directors and shareholders alike. Our clients often find that our objective, expert evaluation and our broader experience in supporting technology SMEs, can fundamentally change the way they look at and approach their R&D strategy.

Our service is offered on a contingency basis, providing peace of mind for our clients.

As the policies on R&D Tax Credits inevitably change, it’s important that we work with you on an on-going basis to ensure that all future claims are within guidelines and claimed to their full potential.

 


Patent Box

Patent Box is a relief targeted at companies of all sizes seeking to exploit patented inventions and will allow them to apply a reduced rate of corporation tax to all profits relating to qualifying IP. The potential tax savings can be significant as 100% of all your product revenues potentially are included in the computation, irrespective of how large or small the actual patented component is compared to the size and cost of the overall product.

It is in addition to the R&D Tax Credit scheme, so companies can potentially benefit under both schemes.

At MSC R&D, we have the experience and expertise to help clients in the short term and long term through:

  • Evaluating and processing opportunities for benefiting from potential Patent Box tax savings
  • Reviewing current IP policy and R&D strategy, recommending future IP strategy and working with the client to implement it.

 


Capital Allowances – PEFFs and RDAs

Own your commercial premises or have incurred investment on a leased property in recent years?

Read on!

Incurring capital expenditure (e.g. buildings and equipment) for the purposes of carrying out R&D?

Read on further!

Property Embedded Fixtures & Features (PEFFs)

Capital Allowances allow commercial property owners to claim qualifying items of capital expenditure as a tax deduction and are a valuable tax relief.

However, whilst Accountants regularly and comprehensively claim Capital Allowances on moveable items, furniture etc, based on invoices provided by their clients, the capital allowable items embedded within the property are often overlooked, resulting in claims typically less than 50% of entitlement.

Invoices are generally unavailable for these items and, until the accountant, owner or leaseholder instigates the process of identification i.e. a ROOM BY ROOM survey with appropriate costing of these qualifying items, they will remain unclaimed and a potential substantial benefit to the client will remain hidden.

Who can claim the benefit?

The tax benefit is available to the party that incurred the relevant expenditure or purchased the property i.e. an individual, a Company, partnership etc.

How is the benefit claimed?

The claim is used to generate a tax refund where possible and is used as a tax credit to reduce future tax liabilities.

How can MSC R&D help?

Recognising the specialist nature of this area of taxation, MSC R&D have partnered with a leading and long established provider to provide our clients with this service.

Our partner has been proving this service for over 15 years, successfully handling 000’s of claims ranging between £60,000 and several million.

Their methodology affords the client:

  • Their intimate knowledge of Capital Allowances legislation
  • Their stringent investigation of the previous handling of Capital Allowances
  • Their professional surveying and costing of property
  • Individual advice pertaining to each case
  • Liaising with professional Advisors and HMRC
  • Comprehensive aftercare during the time when HMRC may revisit a claim.

What next?

If you can answer YES to one or more of the following questions and are currently profitable and paying Corporation Tax:

  1. Do you own, or intend to since year end, a commercial property?
  2. Has there been significant expenditure on your existing commercial premises in recent years?
  3. If you lease premises, has there been significant expenditure on it in recent years?

Contact Iain Gray at iaingray@mscbdg.co.uk, or call on 07791 139558

Research & Development Allowances (RDAs)

R&D allowances provide generous 100% first year tax relief for fixed asset capital expenditure carried out by trading companies, individuals and partnerships – unlike R&D tax credits which can only be claimed by companies. It is a first year allowance and can therefore only be claimed in an open year and expenditure must have incurred in that year.

So, if you are involved in R&D and you spend money on capital assets, certain expenditure can still qualify for R&D capital allowances (RDAs). It would first be necessary to identify and clarify what constitutes qualifying expenditure.

Examples of qualifying expenditure for RDA are:

  • In essence the costs of buildings in which R&D is carried out and the equipment to conduct the R&D activity, all qualify.
  • It is, however, important to note that when capital expenditure is incurred on a property for R&D purposes, only the building itself potentially qualifies for RDA, and not the land.
  • Claims can be made for the designated part of the building where the R&D activity is carried out, but this must be readily identifiable.

Distinction of Revenue & Capital

A detailed review of amounts treated as capital items would need to be carried out in order to satisfy the conditions of what HMRC would accept as being ‘qualifying expenditure’ for the purposes of claiming allowances.

Benefits

The main benefits of RDA are that they can give 100% tax relief on items for which no capital allowances (or Annual Investment Allowance – AIA) are normally claimable, such as a laboratory used for research etc.

There is no upper limit on the amount which can be claimed (unlike AIA).

How is the benefit claimed?

Relief can be claimed on the current tax return, or by way of amending a previous tax return, subject to the usual time limits of submitting an amended return.

As with PEFFs, the RDA is only of value to companies who are in a tax paying position.

How can MSC R&D help?

In conjunction with our partner, MSC R&D has the expertise to guide you and your accountant through the complete process. Typically we would help you identify and claim any eligible RDAs alongside our R&D Tax Credit service.

Contact Iain Gray at iaingray@mscbdg.co.uk, or call on 07791 139558

Don’t waste your Innovation investment – maximise your R&D Tax Relief!

 

Case Study – Spend360