Partnering with you to help your clients fund innovation and improve productivity by claiming R&D tax relief

Transcription

1 Partnering with you to help your clients fund innovation and improve productivity by claiming R&D tax relief

2 Who are we? 3 Introduction to research and development tax relief 4 Summary of research and development tax relief 5 Are your clients eligible for R&D tax relief? 7 How to refer clients to us 8 Our process 9 Why partner with us? 10 How to complete tax computation and CT Get in touch 12 2

3 Who are we? At GrowthPad, we specialise in research and development tax relief (R&D tax relief). As we are specialists in R&D tax relief we have a thorough understanding of the legislation, enabling us to maximise the value of R&D tax relief claims for our clients. This in turn helps our clients further fund their innovation, reinvest in new staff, technology and resources. We prepare highly detailed technical reports and financial schedules to submit our clients R&D tax claims to HM Revenue & Customs (HMRC). This is in a format that HMRC approve, enabling HMRC to process the claim within four weeks of submission. Our goal is to facilitate innovation in the UK through R&D tax relief to enable business owners improve and grow their companies, helping to keep the UK at the forefront of science and technology. At the same time, we want to keep the claim process as easy and less time consuming for business owners so they can concentrate on what they are good at running their business! We are advised by our clients and partners that we are easy to work with as we combine our understanding of technology, science and tax, whilst sharing a passion for innovation and delivering great results. Most of our new work is a result of referrals, a testament to our fantastic service and great relationship with our clients. 3

4 Introduction to research and development tax relief Based on a proportion of Gross Domestic Product, the UK has historically not invested in R&D as much as other countries. The Government noted that this proportion actually fell between 1981 and 1999, whilst in other countries this was increasing. The Government therefore introduced R&D tax relief to encourage UK companies to invest building a knowledge based economy and improve productivity. The Government introduced two schemes, one targeted at small medium sized enterprises (SMEs) and the other for large companies. The R&D tax relief for SME is one of the most generous tax corporation tax reliefs available. This was not however the case when the relief was first introduced in April 2000, where the enhancement deduction was 150% of R&D expenditure. Over the years, this enhanced deduction has increased and since April 2015 is 230%. This is now a huge driver in companies claiming R&D tax relief. Over the years, the Governments have made changes to the schemes, including abolishing the Large Company R&D scheme and replacing it with research and development expenditure credits (RDEC), changing the rules of qualifying expenditure and introducing Advance Assurance. The current Government is looking to further improve the availability and awareness of R&D tax relief. It announced that that administrative changes will be made to increase the certainty and ease of claims. More companies will therefore be making claims, with the relief providing an advantage over competition. 4

5 Summary of research and development tax relief R&D tax relief can secure substantial reductions or refunds of corporation tax. Loss making companies can claim payable cash credits as a proportion of their R&D expenditure. Qualifying projects HMRC has a clear but very expansive definition of R&D. A project has to meet three conditions as following: 1. Aiming to or achieving an advance in science or technology. The advance does not have to be blue sky innovation nor ground breaking. It includes: making an appreciable technological or scientific improvement to an existing product, material, service, device or process. For example making an existing product smaller, faster, stronger, efficient, cheaper and so on. failed projects that attempted an advance in technology or science. 2. Overcoming technological uncertainties. A technological uncertainty exists when there is not an established path to successfully complete the project and technical challenges exist. For example, the process may involve development based on trial and error. 3. Must not be readily deducible by a competent professional. In practice, this is generally demonstrated by a project lasting more than 2-3 months. Qualifying costs Staff costs to include salary, employer s national insurance contributions and employer s pension contributions. It excludes dividends. Materials and consumables including light, heat and power. Outsourced work or agency staff. Software used directly in the R&D, such as CAD systems. Clinical trial costs to include payment to volunteers for testing. Time limits to make a claim Companies must claim R&D tax relief within two years from the end of the accounting period in which the development took place. For example, a company with a 31 December 2015 year end must claim by 31 December

6 Types of R&D tax relief There are two variants of the R&D tax relief scheme. The SME scheme is for SMEs and RDEC is targeted at larger companies. To qualify for the SME scheme a company has to have less than 500 employees with either: Turnover less than 100mn or Gross assets on the balance sheet less than 86mn The schemes work differently, but generally SMEs receive an additional deduction of 130% of their R&D costs in their company tax return, which equates to a tax saving of 26%. Large companies under the RDEC scheme receive a taxable credit of 11% that results in a tax saving of 8.8%of their R&D costs. Loss making companies SME companies that have made a loss during their accounting year can surrender their loss to HMRC for a cash credit of 14.5%, which equates to a tax benefit of 33.35%. Examples Profit making SME A company spends 120,000 on a qualifying R&D project. In the accounting period, the company would receive its normal 120,000 deduction as an expense. We would get the company a further 156,000 deduction through R&D tax relief. The additional cost of 156,000 will result in a corporation tax reduction of 31,200. If the corporation tax has already been paid, then 31,200 will be repaid by HMRC. Loss making - SME A loss making SME will be able to surrender its losses. If a SME has 120,000 of qualifying R&D expenditure and has a trading loss of 400,000, the maximum loss surrenderable would be the lower of: 400,000 (includes 276,000 of R&D enhanced expenditure) 230% of 120,000 = 276,000 In this case, 276,000 would be surrendered to HMRC for a cash credit of 14.5%, resulting in a payment from HMRC of 40,020. Large company - RDEC Under the RDEC scheme with R&D expenditure of 120,000 would receive a corporation tax reduction or refund of 10,560. 6

7 Are your clients eligible for R&D tax relief? Has the company in the last three years attempted or completed any of the following: Is the business a UK company? create new or improved products, processes or services? improve its efficiencies by reducing costs, improving service levels or winning more business through technological improvements? develop its own technology, software or tools for its own use? experiment with new equipment or production techniques? implement changes to its business to adhere to regulatory changes? Did the company spend any money on salaries, outsourcing, materials or software? Website GrowthPad.co.uk hi@growthpad.co.uk Phone

8 How to refer clients to us We understand that each partner prefers to work in their own way so if you want a different arrangement please let us know. Option 1 We can review your client list with you, assisting you to identify any clients that could be eligible for R&D tax relief. You can contact the client and advise them of the benefits of R&D tax relief. We would then have a quick conference call with your client to establish eligibility, costs involved and organise our first meeting with them. Option 2 Once you have spoken with your client, perhaps at your annual accounts meeting, you can gather some details and complete our prequalification questionnaire. You can , text or WhatsApp the questionnaire to us or alternatively, telephone us providing the information we require as per the questionnaire - whichever methods suits you! We will then contact the client to establish qualifying projects, expenditure and arrange a meeting for a more detailed discussion. 8

9 Our process Step 1 - Refer your client to us Step 2 - Free assessment undertake high level due diligence to confirm your client s eligibility and identify the qualifying costs identify the accounting periods a claim can be made agree a fee structure and issue our letter of engagement agree to a meeting Step 3 - R&D tax consultant meeting our expert R&D tax consultant will gather all the information required for us to produce a robust claim visit your client for this meeting we try to make the process as easy as possible for your clients! Step 4 - Manage the claim, completing the technical report and supporting cost schedule prepare a technically sound report and produce financial documentation to support the claim format of our report is accepted by HMRC and we have never had a request for further information Step 5 - Liaise with you and your client and submit the claim to HMRC provide you and your client with the details of the qualifying R&D costs provide you with any revised tax computations and CT600s once the claim has been approved, it is submitted to HMRC s specialist R&D Department issue our invoice, but only expect to be paid once HMRC has processed the claim and your client has benefitted from the tax saving Step 6- Client can relax while the claim is processed by HMRC HMRC process the claim within four weeks once the claim has been processed, we receive our fee and pay you the agreed referral fee 9

10 Why partner with us? Improve revenue stream Simply add on to your existing services with a generous commission Unlock hidden cash for you clients Claim up to 33.35% of costs spent on research or development Existing client base Lots of potential referrals already exist in your current client list No risk We operate on a no win no fee basis Easy sale A quick conversation with your client will often result in a referral Grow your client base Existing clients will tell their peers about the all round service that you can offer 100% success rate None of our claims have been rejected as we only submit claims that we know will qualify No extra costs for enquiries We do not charge any additional costs for any HMRC enquiries Broaden your services No need to take on new specialist staff or train existing staff Client care We treat our service as an extension of your service and work closely with you and your client Client retention Clients will not be poached by other firms that provide R&D tax relief services Easy Our claims process is quick with the first claim needing 2 hours of your clients time and subsequent claims needing 1 hour Marketing assistance We provide white branding for marketing purposes, such as shots and brochures Quick end to end service We aim to complete a claim within two weeks of receiving all the information and the refund is usually received within 4 weeks of submission We do the hard work Simply introduce us to your client and we will undertake the hard work, with each referral only taking you a few minutes to pass to us Work completed in-house All our work is completed within the business so our excellent standard of work remains constant Expertise We are experts in R&D tax relief so you can feel comfortable that your clients will receive the highest relief to which they are entitled 10

11 How to complete tax computation and CT600 Step 1 - Add to tax computation Multiply the qualifying R&D expenditure by the uplifting rate of 130% and include this figure in the tax computation as enhanced R&D expenditure. This figure will be the difference between the 100% claimed in the accounts as an expense and the enhance expenditure of 230% Step 2 - Complete the CT600 Calculate the maximum permissible payable tax credit. This would be the lower of: Trading loss (including 230% of R&D costs) 230% of qualifying R&D cost The lower amount is multiplied by 14.5%. We would normally calculate this figure for you. Enter the payable tax credit amount in Boxes 530 and 875. Boxes 525, 545 and 570 should be automatically updated. Put an X in Box 650. Claiming RDEC for an SME Enter the enhanced expenditure in Box 660. This is 230% of the qualifying R&D costs. Box 670 should automatically update to include the enhanced R&D expenditure and any creative enhanced expenditure claimed. Boxes 155 and 780 should automatically update. Box 155 would include the profits after deduction of the additional R&D tax relief, whereas Box 780 would increase losses. Under certain circumstances, a SME may have to claim some or all of their expenditure under RDEC rules. This would be the case if it received a grant or subsidy or because it is undertaking subcontracted R&D for a large company. We will advise you whether the claim is under SME or RDEC rules. In this circumstance, the RDEC amount is claimed as following: The boxes required to be completed to claim R&D tax relief may not be presented in numerical order by the computer software you use to complete the Company Tax Return. Step 3 Claiming R&D tax credit (only complete if surrendering losses) If the SME company has made a loss after deducting the additional expenditure for R&D tax relief and it wants to claim the payable tax credit, put an X in Box 40. Enter the expenditure credit figure (11% of the qualifying cost) in Boxes 530 and 880. Box 570 should automatically update. Put an X in Box 650. Enter the enhanced expenditure in Box 660. This is 230% of the qualifying R&D costs. 11

12 Get in touch Tehsin Khan Director GrowthPad.co.uk 12