From April 2012 com­pa­nies that spend mon­ey on R & D can claim up to 225% of their expen­di­ture against their tax­able prof­its (up to 200% for any expen­di­ture pre April 2012).

This means that for every £1,000 of qual­i­fy­ing expen­di­ture, a com­pa­ny pay­ing Cor­po­ra­tion Tax at the low­er rate of 20% could save up to £450 in tax.

You might think that this gen­er­ous relief is only for the big med­ical com­pa­nies and boffins in white coats, but you’d be wrong! It can be claimed by any size of com­pa­ny as long as they incur costs in try­ing to improve a prod­uct or ser­vice through a tech­no­log­i­cal advance. The claimant doesn’t even need to own the Intel­lec­tu­al Prop­er­ty Rights.

The claim for relief can be par­tic­u­lar­ly valu­able to start-up com­pa­nies or com­pa­nies in their ear­ly years. Where a com­pa­ny has a trad­ing loss, it can make a tax cred­it claim which could result in the com­pa­ny get­ting tax cred­it pay­ments even when no Cor­po­ra­tion Tax has ever been paid!

Giv­en that HMRC believes that there are well over 150,000 SMEs in the UK that have not tak­en advan­tage of the reliefs avail­able and with the aver­age claim being £40,000, that equates to £6bn poten­tial­ly going unclaimed!

So what companies can qualify?

The most com­mon claims and the typ­i­cal com­pa­nies that over­look their right to claim are:

• Elec­tron­ics and elec­tri­cal engi­neers
• Mechan­i­cal engi­neer­ing
• Prod­uct design
• Food and drinks indus­try
• Life sci­ences
• Soft­ware and games devel­op­ers
• Pack­ag­ing and print com­pa­nies
• Envi­ron­men­tal waste
• Man­u­fac­tur­ing

The expen­di­ture need not solve a prob­lem, find a solu­tion or cre­ate some­thing new or inno­v­a­tive. It is mere­ly the attempt to do so that is the qual­i­fy­ing activ­i­ty.

R&D Tax Relief is a very com­plex sub­ject. Please call 0141 332 6331 or email mail@russell-russell.co.uk if you believe that you or a com­pa­ny you know may be miss­ing out on a poten­tial claim.