Research and development (R&D) tax relief is a government subsidy administered through the corporation tax self-assessment system. The relief rewards companies that carry out innovative activities, to technically improve products, processes, devices, materials and/or services.
In order to claim R&D tax relief a company must be carrying on a project that:
• Seeks to achieve an appreciable improvement in the field in scientific or technological terms, and
• Requires the resolution of scientific or technological uncertainty.
There is a common misconception that the relief only applies to high-technology companies, but in fact, the relief is equally applicable to companies that operate in engineering, manufacturing, software and agricultural industries, and we have experience of working with companies across these sectors.
For companies that are making profits, the relief can reduce their corporation tax bill and represents a subsidy of approximately 25p per £1 spent on R&D.
For some small or medium sized companies that make losses, the relief allow them to cash in their losses for a cash sum, representing a subsidy of as much as 32p per £1 spent on R&D.
In recent years H M Revenue and Customs have been enhancing the tax relief available to innovative companies and are encouraging companies that have not claimed before to do so.
For further details please contact Sara Crowther or Susan Pudge in our Cheltenham Office.