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SEIS Briefing Paper

A few clients and contacts have asked us for a short briefing paper outlining the key points related to the Seed Enterprise Investment Scheme (SEIS).

Although not intended to be an exhaustive list of all of the relevant points, this SEIS one-pager summary of the key points may be useful for entrepreneurs and business angel investors alike.

Please let us know if you have any specific queries. We would be delighted to help.

How to apply for HMRC advance assurance for SEIS / EIS

Here is an updated short video on how to find HM Revenue & Customs’ designated form for applying for advance assurance that your company is a qualifying company for the purposes of raising funding under SEIS or EIS (or both).

You can find the HMRC form here.

Many companies prefer us to take care of the process for them from:

  • checking the proposed share allocations and share capital
  • reviewing the Articles and / or shareholders agreement for any potential issues
  • completing the advance assurance application form – EIS/SEIS(AA)
  • drafting an accompanying letter to the form EIS/SEIS(AA) where there are unusual factors or if we require clarification on potential points
  • tracking the application through HMRC
  • assisting management in the issue and timing of shares under SEIS / EIS
  • applying for tax certificates from HMRC (Forms SEIS1 / EIS1) in order that the investors can claim the tax reliefs

Let us know if we can help you.

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What is the definition of an SME for UK R&D tax credits?

You may be aware that there are two schemes for the UK Government R&D tax incentive:

  1. SME R&D tax incentive
  2. Large Company R&D tax incentive

The SME R&D tax scheme is far superior to the Large Company scheme in terms of amount of tax relief and therefore potential cash tax savings at stake.

Fortunately, the size limits governed by the EU are quite large for the purposes of defining an SME for UK R&D tax credits purposes. In order to be an SME a company must have:

  • Fewer than 500 employees AND
  • Balance Sheet total (ie gross assets) not exceeding €86m OR
  • Turnover not exceeding €100m.

This should cover 90%+ of companies allowing them to claim under the more favourable SME regime – although you need to take care in group situations especially where another company owns 25% or more of your company and / or your company has a stake of 25% or more in another company.

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Am I too late to claim R&D tax credits?

If you have been carrying out development work on a new product or service in earlier years and have only just stumbled across R&D tax credits, you may be concerned  – thinking you may too late to make a claim…

The good news is that this may not be the case – as R&D tax claims can be filed retrospectively.

A claim for UK research and development tax credits is made within your company tax return. This is typically completed and filed shortly after your accounting period end alongside the preparation and filing of your company accounts.

What if I have already filed my company tax return for the period in which the R&D activities took place?

No problem – provided you are still within the permitted time limits (see further below) then you can file an amended return. This time the amended CT600 return will be filed including the claim for R&D tax relief.

How long is the permitted time limit for filing a retrospective claim for R&D tax credits?

A company can make a restrospective claim for R&D tax relief for the periods ending in the past two years.

As an example, at the time of writing this article (25 Feb 2015), a company with a 31 December year end would be eligible to make retrospective claims for R&D tax relief for the periods ended:

  • 31 December 2013 – time limit expires on 31 December 2015
  • 31 December 2014 – time limit expires on 31 December 2016

So it is still theoretically possible for a company to make a claim for R&D tax credits on a research and development project that was carried out way back in January 2013!

(For clarity, the time window for making a claim for enhanced R&D tax relief for the year ended 31 December 2012 would have expired on 31 December 2014.)

Don’t take this good news as a basis for “putting off” or delaying making your claim. There is still lots of work for us to do to help you maximise your claim and a last minute rush rarely helps!

 

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How do I make a claim for R&D tax credit relief?

You make a claim for Research and Development tax relief via your company’s corporation tax return (CT600). Your company is required to file a CT600 and supporting tax computation after each accounting period. The R&D tax credit claim slots into this return.

Our detailed R&D report and suppporting calculations is filed with your relevant HM Revenue & Customs (HMRC) dedicated R&D Unit immediately after the CT600 has been electronically filed by your accountants.

Your CT600 company tax return is not actually due to be filed with HMRC until 12 months after the accounting period end – however, most companies are eager to get their R&D tax credit cash payment or at least have some certainty in the run up to their corporation tax payment date (9 months and one day after the period end).

So for a company with an accounting period end of say 31 December 2014, the due dates are as follows:

  • statutory accounts due to be filed with Companies House – 30 September 2015
  • corporation tax payment due – 1 October 2015
  • CT600 corporation tax return and supporting tax computation due – 31 December 2015

We often work alongside your accountants to help accelerate the preparation of the statutory accounts and company tax return in order to speed up the R&D tax claim process. This also has the added benefit of allowing us to advise and identify qualifying spend for R&D purposes in realtime before the returns are finalised.

 

Learn some Patent basics with Appleyard Lees

Here we share an interview we carried out with Ean Davies and Simon Bradbury of Appleyard Lees, European Patent and Trademark attorneys.

This interview is intended to be a ‘primer’ for those considering patents as it covers the basics around:

  • what rights do patents offer?
  • how do you apply for a patent?
  • what is the process for a patent being granted?
  • strategies for protecting intellectual property?
  • how you might benefit for funding for your patent?
  • common errors and where a patent might not be appropriate

We hope you enjoy it and please leave comments or questions – we may be able to cover in future sessions…

UK tech companies receive R&D tax credits boost!

Technology companies are one of the winners from yesterday’s Autumn Statement with the announcement that the SME rate of super-deduction for R&D tax purposes will increase from 225% to 230% from 1 April 2015.

This means that tech companies engaged in development project work that seeks to solve technical uncertainty will be able to uplift the deduction for expenditure on qualifying R&D expenditure for tax purposes (primarily salaries of the employees engaged in the R&D project work, plus sub-contracted costs and some consumables used up in the R&D) by a further 5% leading to even greater tax savings – profitable companies will pay less corporation tax whilst loss-making companies (particularly startups and those in early stage development work) can surrender the enhanced R&D tax loss and claim a tax credit rebate from HM Revenue & Customs (normally within 30 days of filing the claim).

Aneesh Varma, founder of Aire – credit scoring reinvented commented that this is a:

“Another positive step from the UK government that vindicates London as truly one of the top startup hubs globally. Especially for algorithm-driven startups like Aire, where ongoing research is absolutely essential to enabling us to help more consumers.”

This enhancement builds on the change introduced on 1 April 2014 which further increased the rate at which companies can receive tax credit rebates. Average claims were already £42,000 so this figure should rocket skywards for many companies following the introduction of these changes.

Al Mackin, Chairman of Manchester based strategic digital marketing agency, theEword commented:

“Innovation is key to our success at theEword. R&D tax credits allow us to take risks with our ideas, and to develop them with a financial safety net. ip tax solutions has been a great partner, their hard work has allowed us to reduce the risk of developing new technologies”

Simon Ratcliffe, COO at Purple Wifi – guest wifi hotspot software, was also pleased to see the changes announced commenting that:

“The announced increase in the amount claimable through the R&D tax scheme for small and medium companies from 225% to 230% will further encourage expenditure in qualifying R&D projects.”

It is not just tech companies that will benefit from these enhancements to the R&D tax incentive – we have successfully filed claims on behalf of companies covering almost every sector imaginable; although there is a slight sting in the tail coming up from 1 April 2015 for companies that go on to sell prototypes or products that contain materials used in the R&D process.

A further welcomed change will see the introduction of an advance assurance scheme for small businesses making their first claim to R&D tax credits  along with new guidance. The Government will launch a consultation in January 2015 on the issues faced by smaller businesses when claiming R&D tax credits. We will be making representations on behalf of startups and fast-growing tech companies and welcome your comments.

So in summary. with the UK R&D tax credit incentive continuing to receive further backing from the UK Government, it is imperative that all companies explore their qualification criteria to ensure that they don’t miss out on one of the single best sources of funding for SMEs – with a 100% track record of success and a no win no fee structure, you have nothing to lose in exploring your enhanced R&D tax relief claim with us.

 

Photo attribution: Dean Johnson

UK Patent Box: Tick the box by 2016

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The UK Patent Box regime has been hit by criticism from other EU nations (particularly Germany) since its introduction in April 2013. It looks like George Osborne has finally heeded to pressure at the most recent G20 conference and agreed a compromise agreement to tighten up some of the rules around this attractive UK tax relief.

It appears that the UK Patent Box – currently offering a 10% corporation tax rate on worldwide profits generated from qualifying patents – will be revamped into a new Patent Box incentive that is more closely aligned with the jurisdiction of the underlying economic risk e.g. the underlying R&D activities. There have been concerns that international groups could benefit from the UK Patent Box for intellectual property registered in the UK whilst R&D activities might be carried out in other nation states.

Changes we expect are as follows:

  • The current (more generous) Patent Box regime will be closed to new entrants from June 2016
  • The current Patent Box regime will be phased out by June 2021
  • A new Patent Box (2.0) will be introduced from June 2016 with tighter rules likely around the underlying R&D being carried out in the UK

So if you’ve elected into the Patent Box by June 2016, it looks like you will be ‘in’ for a further 5 years whilst new entrants will be barred

We expect to hear more concrete detail in the Autumn Statement on 3 December 2014 but companies should be considering now how they might benefit from the current – more widely drawn – Patent Box regime.

It looks like you have until June 2016 to act – although preparations are likely to be necessary way in advance of this date e.g. if a patent is to be granted (as necessary under the current regime)!

New 14.5% SME R&D Tax Credit – How does this work?

A number of questions have been coming in from clients and contacts regarding what the new improved rate of R&D tax credit for loss-making SMEs means in practice?

Here we show you how the numbers work with some simplified examples and demonstrate how the Government will effectively subsidise 1/3 of the company’s R&D costs.

Identifying and maximising relevant R&D costs becomes even more crucial given this step up in receivable amount from HMRC.