Research and Development - why it should be on your agenda
First, because of a backdrop of increasing HMRC scrutiny. HMRC’s dedicated compliance team has more than doubled in size in recent years. Then there’s the built-in complexity of the rules.
Add to that significant change – and it’s not the time to get a claim for Research and Development (R&D) tax relief wrong.
Equally, it’s worth taking stock if your business hasn’t considered R&D eligibility before.
Who is the regime for?
Companies. It’s a corporation tax relief and exists to incentivise R&D spending. At present, there are two types of tax relief:
• small and medium-sized enterprise (SME) R&D tax relief and
• R&D expenditure credit (RDEC) for large companies.
It’s not exclusively about size, though. RDEC can also be claimed by SMEs who have been subcontracted to do R&D by a large company.
For R&D purposes, an SME is defined as:
• a UK limited company, subject to UK corporation tax and
• the company or group to which it belongs has fewer than 500 staff and
• its turnover is less than 100m euros or
• its balance sheet total is less than 86m euros.
Change possible
A government decision on creating a single, simplified ‘RDEC-like’ scheme for all claimants is due shortly. At the earliest, change could apply to expenditure incurred from 1 April 2024.
