Research and development Flashcards
When does R&D take place
When a project seeks to achive an advance in science or technology through the resolution of scientific or technological uncertainty.
Does not have to be achived all resolved
Who qualifies
Small and medium size enterprises
Fewer than 500 employees
Annual turnove less 100 million euros
Annual balance sheet figure of less than 86 million euros
Usual effect
The company can claim 230% of the R&D expenditure when caculating adjusted profits for tax purposes
Capital
Does not qualify for enhanced R&D expenditure however is elgible for 100% FYA (even building for R&D)
Staff costs
All earning paid to employees and directors who are directly and actively involved in resolving the technological uncertainties of a project
All earning paid to employee and directors who are directly and activelu involved in indirect activities which are specifically identifiable as part of the project (Maintenance engineer or receuiter)
Salary, bonus, pension contribution and ER NI
Not benefit in kind
Software
Software that is employed directlu in carrying out R&D will qualify for the enhanced expenditure
Software that is employed directly in indirect activities of the R&D project also qualify for enhanced expenditure e.g payroll software
Not software to train HT department
Consumable or Transfromable
Revenue expenditure which is directly employed in R&D. Item that can be consumed or trasnferred.
LIght, heat, power
Production of G&S is does not qualify R&D has already occurred to get to this stage
Clinical trials
Qualify for enhanced relief
Subcontracted company
Connected
If connected then it is the lower of the actual amount spend or the cost to the third part
Remember the full cost still received 100% relief
Subcontracted company
Unconnected
If unconnected then it is 65% of the actual amount spend which qualifies for the enhanced expenditure.
If unconnected a joint election can be made for the ‘connected treatment’
Election must be made 2 years from the year end in which the contract was entered into
Externally provided worker
Following conditions must apply:
Must be an individual
Not a director or employee of the company
Be onliged to provide services personally
Be under the controll of the company
65% rule if unconnected (election can be made)
Lower of expenses or cost incurred by individual if connected
Explain if the company is loss making
If the company has made a loss, the loss can be surrendered for a tax credit
The loss surrendered is the lower of:
The unrelived loss
or 230% of the qaulifying R&D expenditure
The tax credit is calculated as
14.5% of the loss surrendered
When does the cap apply
Accounting periods starting after 1st April 2021
The cap = 20,000 + 3* relevant expenditure on workers
Relevant expenditure included
All PAYE and NI liabilites on all staff (not just R&D staff)
Also included that of externally provided workers and connected subcontractors
When does the cap no apply
The company is creating intellectual property
e.g patents copyright, design rights, trademarks