Deadline looms for R&D tax credit claims

Oct 26, 2014

Businesses have until December 2014 to claim tax credits for qualifying R&D work carried out from as far back as 2012 up to the end of this year.

The government has set aside approximately £1.5 billion per year for companies it deems to be undertaking qualifying R&D activities and businesses can claim cash repayments of up to 33% of the qualifying R&D expenditure.

The R&D tax credits available to small and medium enterprises have been substantially increased over recent years meaning that the cash value of claims for tax paying companies has increased to £26 for every £100 of R&D spend from April 2014 (based on a 21% tax rate) and £32 for companies with losses.

HM Revenue & Customs has also made the large company regime much more generous by introducing the Research and Development Expenditure Credit.

RDEC allows larger companies from 1 April 2013 to recognise the benefit of their R&D spend effectively as a grant against cost, opposed to within the tax line, which helps add visibility. Loss makers are now also able to claim cash back from HMRC.

Angela Browning (pictured), who leads PwC’s Tax innovation incentives group in Milton Keynes, specialising in research and development, said: “R&D tax credits are here to stay so it is important that businesses understand how the scheme works and how they can benefit from it.

“In this final quarter of the year, businesses should be working to put their claims in for the past 24 months – to make sure they take advantage of the financial benefits this scheme offers.

“A common misconception is that R&D tax credits are limited to a company developing something completely new and from scratch, however R&D also includes developing a process or product that already exists in the industry, making an improvement to an existing product or process, in short any activity that aims to achieve a technological advance.” 

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