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Taxman wants to help you claim R&D tax relief

Newsletter issue - February 08.

The research and development (R&D) enhanced tax relief for smaller companies is often ignored as business owners feel it is too complicated to make a claim. However, the Taxman is actively encouraging small companies to claim, by providing help and guidance through a number of specialist R&D centres.

Your company could qualify if it spends at least £10,000 per year on qualifying R&D. If the claim is successful it can deduct 150% of the actual qualifying R&D costs from its taxable profits. Where the claim creates a loss for the company, part of that loss can be converted into a payable tax credit.

The catch is the definition of R&D for this tax relief is very strict. The research must directly contribute to achieving an advance in science or technology through the resolution of technological or scientific uncertainty. This means that the R&D work must not only benefit your company, but it must break new ground scientifically, or in a technological context. Achieving a patent for your innovative product goes a long way to proving you have carried out qualifying R&D work.

The deadline for submitting a claim for R&D tax relief is now two years from the end of the accounting period in which the costs were incurred. To gain the enhanced tax relief for R&D costs incurred in the year to 31 March 2007, you must send your claim to the Taxman by 31 March 2009. However, R&D tax relief claims for earlier years are still possible. You can submit R&D tax relief claims for any accounting period ending after 31 March 2002 and up to 31 March 2006, before 31 March 2008. But this doesn't leave you much time to formulate your claim.

We can help you draw up your R&D tax relief claim, but please talk to us as soon as possible.