What is it?
Back in the 2011 Autumn statement, the Chancellor George Osborne announced the introduction of an ‘above the line’ tax credit by April 2013 to encourage R&D activity by larger companies. Above the line tax credit will enable loss making companies to claim a payable credit.
The intention behind the credit is to incentivise the investment decision makers in companies.
Who Does it Apply to?
Companies or organisations can only claim R&D Relief if a project seeks to achieve an advance in overall knowledge or capability in a field of science through scientific or technological uncertainty. This is opposed to simply seeking an advance in ones own state of knowledge or capacity.
Defining Your Project
To determine whether your project falls in to the correct category, there are 4 questions that you should take in to consideration, they are as follows,
1) What is the scientific or technological advance?
This is where you should consider what exact scientific or technological advance is being sought, simply stating the name, process and functionality of the project will not suffice.
2) What were the scientific or technological uncertainties involved in the project?
This exists when knowledge of whether the projected outcomes are scientifically possible or technologically feasible is not readily available or deducible by a competent professional working in the field.
3) How and when were the uncertainties actually overcome?
This section is used to describe the methods adopted to overcome the uncertainties, and what analysis and subsequent investigations were undertaken. This section does not have to contain great detail, just a sufficient amount to show that the process was not straightforward.
4) Why was the knowledge being sought not readily deducible by a competent professional?
It might be publicly known that others have attempted to resolve the aforementioned uncertainties and failed, on the other hand the uncertainties may have been resolved however information doesn’t exist in the public domain that show precisely how.
Which Costs Qualify?
There are several costs that fall under the category of R&D, for example,
– Employee Costs.
– Staff Providers
– Payments to Clinical Trials Volunteers.
When to Claim
Claims for R&D Relief must be made in your Company Tax Return or amended return. The average time for making your claim is two years after the end of the relevant Corporation Tax accounting period.