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