Understanding UK Research and Development Tax Credit

What is HMRC R&D Tax Credit?Companies investing in research and technology can claim relief from Corporation Tax and make a substantial saving. • The Scheme was first launched in 2000 • Around £6 billion has been claimed by UK companies

between 2000 and 2010. • 24,000 companies have claimed this relief. There are two different schemes, viz.• The Small or Medium-sized Enterprise Scheme • The Large Company Scheme

SME’s with less than 500 employees or with a turnover of £86 million can claim relief from Corporation Tax. Those with no tax bill can seek a cash payment. Large Companies Scheme is now replaced by the Above the Line credit scheme wherein a company with no tax bill can seek a cash replacement.

How Does the R&D Tax Credit Work- Understanding the Nitty-gritties?• The ATL (Above The Line) Scheme is not made

compulsory until 2016. Currently the Large Company Scheme and the ATL run concurrently.

• ATL credit will be paid at headline rate of 10%. This can offset the debit in a profit and loss account statement.

• For large company: the R&D expenditure is multiplied by 30% of the corporation tax of 24%. This comes to £7.20 for every £100.

• For small company: the R&D expenditure is multiplied with 125% of small profits of 20%. This saves £25 for every £100 spent.

What are the Preconditions to Claim Tax CreditTo make a successful claim for R&D Tax Credit,• The company should pay Corporation Tax• Credit cannot be claimed by a sole trader or a company that

is in partnership.• The company’s current financial records must be up to date

and should not cast a doubt about its ability to continue in business

• Claim can be made only for revenue expenditure such as premises cost and wages.

• Claim must be made within 2 years of the end of accounting year during which the expenditure was incurred.

How do we help?RandDtax offers to help accountancy firms to reduce problems related to R&D Tax Credit claims and make a successful claim. Our service features include;

• No win – no fee• Free initial assessment• Helped clients gain in excess of £8 million • Handled more than 500 claims for around 230

companies • Charge 40% lower than competitors

For more details, visit http://www.randdtax.co.uk