FSPA & Lboro Uni IPR and R&D Day - Capitus Sports

R&D Tax Relief: Are you getting the credit you deserve...?

Sports Technology Institute, Loughborough

9 September 2010

(i) Overview of R&D tax relief schemes

(ii) R&D within sporting industries

(iii)Misconceptions and concerns....

(iv)Practical advice to maximise the relief

www.capitusgroup.co.uk

(i) Small or Medium Enterprise (SME) regime

(ii) Large Company Scheme

(iii) Qualifying expenditure

(iii) Research and development - definitions


Pre 1 August 2008

< 250 Employees

and

or

Balance sheet totalling no more than €43m

Annual turnover notexceeding €50m

Post 1 August 2008

< 500 Employees

and

or

Balance sheet totalling no more than €86m

Annual turnover notexceeding €100m


SME

• Corporation tax relief at 175% on expenditure.

• Equates to 15.75% saving on initial cost.

• Loss surrender for cash back at a rate of 24.5%.

Large Company

• Corporation tax relief at 130% on expenditure.

• Equates to 8.4% saving on initial cost.


Reduced

taxable profit

OR

Surrender

loss

Revenue R&D expense £1,000,000

Uplift at 75% £750,000

Total deduction will result in:

Qualifying R&D £1,000,000

Uplift at 75% £750,000

Loss surrendered £1,750,000

Tax saved @ 21% of £367.5k Tax credit @ 14% £245k


Revenue expenditure uplift 130%

No surrender credit

Effective tax saving (at 28%) of

8.4% on expenditure


Companies which receive funding for R&D activities may not claim under the SME Scheme.

SMEs undertaking R&D on behalf of others may not claim under the SME scheme.


• All companies:◦ Staff costs (wages, employer NIC, pension but no BIK)◦ Consumables◦ Power, fuel, water used in R&D◦ 65% of payments to agencies (externally provided workers)

• SME regime only:◦ 65% of payments for R&D contracted out to others

• Large company regime only:◦ Payments to qualifying bodies (e.g. universities) and

individuals◦ Customer funded research (but not where customer is SME)


• Qualifying expenditure on Qualifying R&D

• 100% R&D allowances available

• Provides a permanent benefit for assets not qualifying for other allowances and may be claimed on buildings and facilities.


R&D takes place when there is a PROJECT

That seeks to achieve an

ADVANCE IN SCIENCE OR

TECHNOLOGY

With activities that DIRECTLY CONTRIBUTE

To the resolution of SCIENTIFIC OR

TECHNOLOGICAL UNCERTAINTY


Significantly enhanced systems in terms of scalability, speed, reliability, flexibility and security

Bringing together different tools and testing compatibility

Maintenance

R&D

Advance in science/technology

AND

Technologically uncertain

Routine/Repeat

All this qualifies


Products, materials, services, processes...

In house and contracted projects

Improving, upgrading, integration...

Aborted projects / unsuccessful projects


Worried by H M Revenue and Customs?

We don’t qualify?!

We don’t have the resources!

It will cost too much to claim!


• Coalition Government want to ‘...refocus R&D’

• Restrict Large Company Scheme?

• Restrict industries?

• Restrict rates for some and increase for others?


Consider R&D tax relief before commencement of project.

Include within budgeting and accounting processes (and financing!!)

Consider the costs which are incurred.

Obtain guidance (and comfort)


Contact details:

Andrew Reid

Capitus Group

Email: [email protected]

Tel: 028 2564 7022


mailto:[email protected]