Under the R&D tax credit scheme, enhanced tax deductions are provided for certain expenditure on research and development (R&D) projects.
The scheme has been active for approximately 15 years but has undergone constant updates of varying complexity, meaning many companies that could potentially benefit have been discouraged from claiming.
Claiming enhanced R&D tax relief can seem like a daunting prospect but there are numerous positives to the scheme, which company directors often overlook.
Just over 15,000 companies currently claim R&D enhanced tax relief each year when many more could and the Government would especially like more small and medium-sized businesses to make successful claims.
The advantages available include a payable tax credit of 14.5 per cent where a loss is surrendered and a mark-up of 125 per cent in the value of deductible costs, which will increase by another 5 per cent from 1st April 2015 (to 130 per cent).
A review conducted by the Office of Tax Simplification (OTS) regarding the UK tax system suggested that HMRC should include more R&D case studies guidance provided for the scheme, make guidance clearer regarding capital/revenue thresholds in relation to software development, and finally to make sure that any qualifying costs are made more transparent.
The Government is currently asking for businesses to provide feedback on the scheme, with particular emphasis on how any of the information could be clarified to encourage more companies to claim.
If you have any good ideas about how to encourage the take-up of R&D tax credits you can respond to the consultation by email to: nalini.arora@hmrc.gsi.gov.uk by the closing date (27th February 2015).
(Please note, the original consultation document – “Improving access to R&D tax credits for small business” – can be found via GOV.UK.)