In 2000, the Government introduced a scheme to encourage innovation within the UK. In this article we explain how the scheme works, what qualifies as Research and Development under the scheme, how it can benefit your business, and how Switchplane can help.
This government scheme works by assessing the costs spent on Research and Development (R&D) activities, and then applies a 230% increase on those costs before deducting those costs from the company's profit. This reduces the corporation tax due. For a company paying 19% corporation tax, this effectively means a company effectively receives a 24.7% discount on any applicable R&D costs. The scheme also applies to loss-making companies who can surrender losses in return for a payable tax credit.
The scheme uses its own definition of what constitutes R&D. Specifically, it must be scientific or technical R&D - but this doesn’t mean it has to involve lab coats and bunsen burners.
For example, software development and engineering design projects may qualify, provided the problem isn’t something that could be ‘routinely solved by a professional’ and includes some level of uncertainty. Furthermore, the solution should also be seeking to provide a genuine advance in current knowledge within the appropriate field.
The main benefit of the scheme is that any qualifying R&D activities your business conducts are essentially being subsidised by the Government.
This means your business receives the benefit from the solution, its associated competitive advantages, intellectual property, and the efficiency improvements with an attractive 25% off the price tag.
We’re often approached by clients with problems that are yet to be solved. Given you’re on our website, it’s likely that you have a need that can’t be solved by some off-the-shelf solution. When you explain your problem, we can advise on which areas may qualify for R&D relief. During your project we can track all the work we undertake that could qualify as R&D.
Before your accounting year end, we will discuss the technical advances and uncertainties overcome with our specialist tax consultants, who will then prepare your calculation. You can then use this figure on your Company Tax Return form, CT600.
At Switchplane, we excel at managing uncertainty and our approach is geared towards breaking down complex problems and developing innovative solutions. We can also provide advice on whether your particular business need will qualify for R&D relief.
Through the R&D relief scheme, Switchplane have helped clients solve their biggest pain points whilst saving £1000s in R&D tax relief. Get in touch to discuss how we can help your business do the same.
For more details on the government scheme, see the guidance on the .gov website.
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