News - Page 4 of 4 - ip tax solutions

Budget March 2014 Headlines for Tech, Digital & Creatives

Headlines include:

  • Extension of Seed EIS tax relief (SEIS) for early stage companies plus 50% CGT exemption
  • Increase in the R&D tax credit payment from HMRC for SMEs from 11% to 14.5% for qualifying expenditure incurred from 1 April 2014
  • Doubling of the Annual Investment Allowance for expenditure on capital equipment from £250,000 to £500,000 from 1 April 2014
  • Personal allowance increases plus welcomed extensions for higher rate taxpayers

R&D Tax Credits Scheme – Don’t miss out!

Statistics from HM Revenue & Customs show that fewer than 1% of UK companies make a claim under the UK’s favourable R&D tax incentive scheme.

There may be a number of reasons for this such as:

  • insufficient advancements in science and technology being undertaken by companies. Little or no technical uncertainties being solved (or seeking to be solved). 99% of UK companies applying routine knowledge to achieve their competitive advantage [HIGHLY DOUBTFUL]
  • lack of awareness [LIKELY]
  • “aware of it but don’t think it applies to my business” [VERY LIKELY]

We urge you to take a second look at the R&D tax scheme as it could benefit your business plus – with average claims currently running at £40,000+ – you would kick yourself if you missed it.

The time is ticking on potential R&D claims for your company as retrospective claims are restricted to those accounting periods ending in the past two years.

Call us for a no obligation initial conversation 0161 961 0096

SEIS – Need to know tips for startups

Here is a short screencast covering some high level need to know tips for startup founders on the Seed Enterprise Investment scheme (‘SEIS’).

A further point to note is that an investment under SEIS must be in return for a subscription for “full risk” shares – a loan does not qualify for SEIS relief.

Presented by Steve Livingston (MD –  IP Tax Solutions Ltd)


R&D tax claims for startups

Companies normally make a claim under the UK’s Research and Development Tax Incentive Scheme within their end of accounting period company (CT600) tax return.

All companies that are engaged in business activities and therefore ‘trading’ are required to file an end of year CT600 tax return so this is not normally a problem.

However, what if you have a start up company and your business is engaged in pre-trading R&D activity that does not require a CT600 tax return to be filed – can you still make a claim under the R&D tax incentive then?

Short answer is: yes.

There is an election that your company can make to HM Revenue & Customs that deems the relevant qualifying expenditure to have been incurred in the period in  which the expenditure was actually incurred (there are normally different rules for pre-trading expenditure for company tax purposes…!) which allows your company to claim the R&D tax relief and either:

  • claim a payment from HMRC in return for the surrender of the enhanced tax loss or
  • carry back the loss or
  • carry forward the surplus tax losses.

You have two years to make such an election following the end of the relevant accounting period.

So if you’re left scratching your head about how to file an R&D tax credit claim when you’re a pre-trading start up with no CT600 due – hopefully this helps.

You will of course need to establish eligibility of the projects and quantify the allowable costs in the normal way.

R&D Tax Credits claims on the increase

HM Revenue & Customs has released its latest figures in relation to the UK R&D Tax Credits tax incentive.

Headlines are as follows:

  • 85,000 claims filed since the SME and Large schemes were introduced in 2000-2001.
  • £8bn+ of tax relief has been claimed.
  • 24,000 different companies have made claims under the SME scheme since 2000-2001.
  • 6,300 under the Large company scheme (launched in 2002-03).
  • 16.5% increase in claims for R&D tax credits in 2011-12 to 12,190 representing £1.2bn of tax relief – split as £780m for Large companies and £420m under the SME scheme
  • 6,710 SMEs claimed R&D relief as a deduction against corporation tax liabilities compared to 790 claims for a payable tax credit (payable to loss-making companies).

Although these headlines make for pretty encouraging reading, there is still a long way to go to ensure that UK companies are claiming their fair share of this generous tax relief

Reading between the lines, its worth noting the following:

  • Less than 10,000 SMEs made a claim in 2011-12 – v approx 4m UK SMEs. Even taking a prudent guess that less than 1% of SMEs satisfy the criteria for the enhanced R&D tax relief, this should still equate to approx 40,000 company claims. So where are the missing 30,000 company claims? Is your company missing out?
  • Average SME claims were £42,000 with London topping the bill with an average claim of £60,000 and Yorkshire falling furthest behind with an average £27,000 claim for R&D tax relief. These figures clearly demonstrate what a favourable and generous tax relief the R&D tax incentive is for UK companies
  • Business services’ makes up the majority of the claims by industry sector which suggests a significant proportion of software related R&D claims – this is interesting when compared to the general apprehension of companies to make an R&D claim for software related services and products. £175m tax relief was secured by the Business Services sector which is almost double that secured by the No.2 spot taken by the ‘Manufacturing’ sector. So if you are involved in software development your competitors are likely securing their claims – are you?

Overall, this latest study is encouraging in that it shows the continued upward trend in R&D claims but we must not be complacent

We are driven to ensure that all UK companies that are undertaking qualifying activities are made aware and assisted either by filing an R&D tax credit claim on your behalf or working with your accountants to optimise existing claims.

This favourable tax incentive can help release more cash into your business to invest in further jobs, equipment and the development of new products and services. Don’t miss out!