CANALITIX ACCOUNTANTS assists Clients from various industries to obtain R&D tax credits.
Companies that are involved in the design and development of a special process to advance the delivery of their services may qualify for R&D tax credits.
What qualifies as R&D?
The government Research and development relief is intended to support companies that work on innovative projects in science and technology but may be claimed by a range of companies that seek to research and develop an advance in their field.
The government recognises that not all research and development results in a successful product. Therefore, R&D tax claims can be made for unsuccessful projects.
Qualifying Criteria
In addition to meeting the government definition of what qualifies as R&D, claimants need to demonstrate that the relevant project is seeking an advancement in science or technology; had to overcome scientific or technological uncertainty along with how they overcame the uncertainty. In addition, the work could not easily be worked out by a professional in the field.
Relevant Costs
Relevant costs that qualify for tax credits include the employment costs of staff engaged directly on the R&D project. Where project staff are provided by an external agency then only 65% of these payments can be claimed. Direct materials and utilities consumed on the project also count as relevant costs.
Cost that cannot be claimed
Expenditure relating to rent and rates, production and distribution of goods and services, capital expenditure, land acquisition, patents and trademarks are not considered as relevant for R&D tax credits.
Small and medium sized enterprises (SME) R&D Relief
The SME R&D relief is available to companies with less than 500 staff, a turnover of under 100 million euros and net assets of less than 86 million euros.
In addition to their business expenditure for the tax year, SME claimants can deduct an extra 130% of their qualifying expenditure from their profit for the year. This results in a deduction of 230% of R&D relevant costs.
Claiming SME R&D Tax Relief
The tax credit is worked out as 12% of qualifying R&D expenditure and is claimed as part of a company's corporation tax return (CT600). If a company is loss making, the tax credit may be used to discharge the liability. Otherwise, the company can obtain a cash payment. A loss-making SME may surrender a loss in return 14.5% of the surrendered loss.