As a new tax year approaches, it is important to ensure you are in the best financial position to help protect and grow your future wealth.
Our Bitesize Tax Planning provides you with details of the key allowances and reliefs available to you. The tax planning tips are available in easy to consider sections.
This article looks at Individual Research & Development Tax Relief including; Small and Medium-Sized Enterprise (SME) R&D Tax Relief, R&D Expenditure Credit (RDEC)
R&D
Research and Development (R&D) tax relief supports companies that work on innovative projects in science and technology. There are different types of R&D relief, depending on the size of your company and if the project has been subcontracted to you or not.
You cannot claim if the advance is in:
- the arts
- humanities
- social sciences, including economics
The project must relate to your company’s trade, either an existing one, or one that you intend to start up based on the results of the R&D.
To claim you need to explain how a project:
- looked for an advance in the field
- had to overcome the scientific or technological uncertainty
- tried to overcome the scientific or technological uncertainty
- could not be easily worked out by a professional in the field
Your project may research or develop a new process, product or service or improve on an existing one.
Small and medium-sized enterprise (SME) R&D tax relief
SME R&D tax relief allows companies to:
- deduct an extra 86% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total of 186% deduction
- claim a payable tax credit if the company has claimed relief and made a loss, the payable credit is worth up to 10% of the surrenderable loss
To claim the relief, you need to be a SME and show how your project meets the standard definition of R&D.
R&D expenditure credit (RDEC)
Large companies can claim expenditure credit for working on R&D projects.
It can also be claimed by SMEs who have been subcontracted to do R&D work by a large company.
The work that qualifies for R&D tax relief must be part of a specific project to make an advance in science or technology.
More information on R&D tax relief can be found here: https://www.gov.uk/guidance/corporation-tax-research-and-development-rd-relief
If you would like to discuss anything mentioned in this article, please contact us.
Download our Tax Year End Checklist to assist with your tax planning below.
See the other topics in our Bitesize Tax Planning series:
Personal Reliefs
- Check Your Tax Code
- Personal Allowances
- Savings & Investments
- Dividend Allowance
Planning for Retirement
Research & Development Tax Reliefs
Personal circumstances differ and not all of this information is applicable to every client and/or their business, this information is general in nature and should not be relied upon without seeking specific professional financial advice.
The Financial Conduct Authority (FCA) does not regulate tax advice, estate planning, trusts or will writing.
The content in this article is for your general information and use only and is not intended to address your particular requirements. Articles should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice.
Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles.
Thresholds, percentage rates and tax legislation may change in subsequent finance acts. Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investments can go down as well as up and you may get back less than you invested. Past performance is not a reliable indicator of future results.
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