People often think that R&D tax credits are only available to high-tech companies working at the cutting edge of science. This is not the case. Essentially, relief is available where you seek to achieve an ‘advance’ by resolving ‘scientific or technological uncertainties’; areas that a ‘competent professional’ in your field would not readily be able to resolve.
In other words, what does your company know how to do today that it did not know in the past? And what will your company know how to do tomorrow that it does not know today?
A “competent professional” in your field may not have the skills of a top scientist but, in turn, will not have experience of other fields. For instance, the advance might involve using established technologies or materials from a different field in your own sector. A competent professional in your own field would not be expected to know how those products might perform in their new application and, as a result, R&D may be carried out.
In addition, many companies will look to improve or develop products and processes and could be resolving scientific uncertainties to do this. They could be developing entirely new products or processes which will help them produce their own products. Perhaps you are systematically testing different options or developing by trial and error? Again, you may be conducting qualifying R&D.
It’s worth looking closely at what you do as up to 225% tax relief could be available as an SME, or 130% as a large company. Loss making companies can also achieve a tax refund!
So, there could be a significant amount for many companies to gain and, as such, it is worth revisiting the opportunities especially if you are in sectors such as manufacturing, engineering and software.
Finally, it is worth remembering that as from 1 April 2013, a 10% rate of corporation tax will apply to profits arising from certain registered patents (qualifying IP). However, to make sure you are ready you should start planning now. And, of course, it could even be worth making patent applications for inventions that were previously unregistered, in order to secure the tax advantage!
We are hosting a series of workshops this October to help you understand these important tax reliefs. To find out more please click here.
For advice and help on considering potential opportunities please contact Robert Leggett.