R& D Tax Credits to Help Support Welsh Recovery; Make Sure You Don't Miss out on Lucrative Tax Relief to Help Subsidise Your Company's Research and Development Projects Writes Denise Roberts from Pkf
Byline: DENISE ROBERTS
There is widespread belief that UK recovery and future growth will stem from both new technologies and research into green energy.
In Wales we have a growing number of established and fledgling businesses who are undertaking research and development at the cutting edge of technology. However, projects come at a cost.
R& D activities typically have a long lead time before the fruits of any investment are realised.
This, coupled with the scarcity of funding available from traditional sources, means that it is more important than ever for companies to look at other ways of funding these vital activities.
While in Wales we have the added benefit of grant support available from the Welsh Assembly Government, R& D tax credits play an important part in helping to plug the funding gap.
R& D tax credits were introduced by the Government back in 2000 for small companies and the relief was extended to large companies in 2002.
The relief effectively subsidises the cost of R& D work done on projects costing pounds 10,000 or more.
Small and medium-sized companies who have less than 500 employees and either a turnover up to EUR100,000,000 or balance sheet assets up to EUR86,000,000 can make a claim to increase their R& D tax deductible costs by 75%. This gives an effective cash subsidy of 36% for companies paying tax at 21% and 49% for companies paying tax at 28%.
Furthermore, for those companies who are currently making losses the enhanced R& D costs can be surrendered to HM Revenue and Customs in return for cash.
The cash received is basically a refund of PAYE and National Insurance contributions that the company has already paid over in respect of its employees.
For example, if a company has pounds 100,000 of qualifying R& D costs, the cash refund potentially available is pounds 24,500 - that is a cash saving of 24.5%.
Large companies do not miss out and can claim to increase their R& D tax deductible costs by 30%. While large companies have taken a bit longer to join the R& D tax credit 'party', they are now firmly focused on maximising any opportunities available.
But it is important to note that only companies can claim this relief and, therefore, those individuals undertaking research as unincorporated businesses will not be able to access the benefits.
In addition to the R& D tax credit relief for revenue expenditure, valuable relief is also available for costs incurred on capital expenditure. …