Even though the government is keen to encourage investment in R&D activities, it is concerned that the generous relief is being abused. Having estimated that £300m of credits have been paid in error, the government will be putting a cap on the tax credit payable. The cap, which will come into force in April 2020, will be three times the company’s total PAYE and NIC liability for the year of the R&D claim.
However, if your company is claiming R&D relief for work largely carried out by UK employees, this restriction should have no impact on you.
It is targeted at companies which, in fraudulently claiming the relief despite having no real presence in the UK, are making no contribution to the UK economy. HMRC has estimated that the restriction will only affect 5% of companies currently claiming tax credits.
It will restrict the tax credit available if your company doesn’t have many employees and instead uses subcontractors to perform R&D activities. Such companies may well be genuinely involved in R&D activities in the UK but have opted not to employ individuals for commercial reasons. In these cases, the cap will still apply and the tax credit available will be reduced, potentially to nil, but any losses which cannot be surrendered for a tax credit because of the cap will be carried forward for use against future profits under the normal loss relief rules.
How we can help
Our R&D tax specialists have generated significant tax refunds and savings for clients investing in R&D. The projects have ranged from the development of artificial snow candles to Recycling – Landfill diversion and Polymer identification.
Our team of R&D tax credit specialists make claiming easy. Every claim is managed by an experienced consultant who advises you on the entire process. We can maximise your R&D claim because our expert consultants can identify all of your qualifying projects and all your eligible expenses including costs that are often missed.
To speak to us about whether you can qualify for and R&D Tax Credits, please call us on 01275 867350. Alternatively, you can send us a message now.