R&D Tax Relief

1. R&D Tax Relief Jaime Lumsden –Terry Toms and Partners Ltd trading as RandDTax 07710 423412, 01536 790907, jaimelumsden@randdtax.co.uk Presentation for Accountancy Practises • Workshop ADISA - Claiming R&D tax credits

2. Who we are… • Member of HMRC Research and Development Consultative Committee.

3. R&D tax credits: Quotes “Of the various tax instruments available to government, R&D Tax Credits have the advantage that they seek to help companies that are themselves prepared to invest in R&D. Government does not need to choose sectors or companies, with the result that R&D can be encouraged in the widest possible range of sectors, taking advantage of businesses’ own insights into likely breakthroughs.” From The Dyson Report on Innovation 2010

4. R&D tax credits: Quotes “It was clear that accountants and other professionals did not always provide accurate information about government support for R&D. This led to uncertainty amongst those making claims for R&D tax credits about what they may claim for and when. It was not uncommon for companies to learn about R&D tax credits only when they appointed new accountants.” An Evaluation of Research and Development Tax Credits HMRC KAI Direct Business Taxes November 2010http://www.hmrc.gov.uk/research/report107.pdf

5. R&D Tax Relief across the European Union Source: European Commission

6. Time frame of claimable costs • You can claim for qualifying costs incurred during the two years up until your last year end. • There is no flexibility regarding the period that can be claimed. The deadline is your next year end. • The effect is to either: • Reduce your corporation tax bill due to be paid (a few days) • Recover overpaid tax made in the claim periods (five weeks) • Increase your carried forward or carried back losses (a few days)

7. What is involved in making a claim? • Recognising the R&D • Scoping all the R&D projects which a company has carried out including start and end dates • Producing a written description of R&D projects in a way that satisfies HMRC Guidelines • You must describe • What advance was being sought on each project • Why it was considered to be an advance • What the scientific or technological uncertainties were • What work was carried out in order to resolve the uncertainties

8. What is the claims process? • The claims process includes: • Writing the technical narrative • Identifying the total qualifying R&D cost per tax period • Applying the correct R&D enhancement rates • Adjusting tax comps and CT600 tax returns to include the R&D • Dealing with any questions HMRC may have

9. Common Myths • None of the following statements is automatically true: • We are not profitable, we cannot claim (losses can be surrendered for a tax credit) • We are doing a project for a client, we cannot claim (not necessarily true) • We received grants, we cannot claim (not necessarily true) • Our tax credit amounts are capped by PAYE levels (no longer applicable to SMEs) • We have to own the IP to claim (no longer applicable) • We cannot claim for sub-contractors based abroad (not true)

10. What costs can be claimed?

11. Claim calculation example 1. Benefit as percent of QE is based in 20% CT rate, is higher for companies with a higher tax rate

12. Claim calculation example 3. £115*14.5%=£16,657

13. Situations where we can help • New Claimants where R&D has not been previously carried out or recognised • Existing claimant where they want to be sure they are claiming all they are entitled to claim • Existing claimants where HMRC have instigated enquiries into new or previous claims or both • Situations where companies are using other R&D tax consultancies and want to compare service levels and/or costs • We offer a free audit on previous claims where there is still time for amendment

14. Helping companies to recognise, scope and claim R&D Tax Credits. Gaining in excess of £103m, over 5000 claims for more than 1000 companies since September 2012. R&D Tax Relief Presentation for Accountancy Practises • www.randdtax.co.uk jaimelumsden@randdtax.co.uk