Home » Expenses (Page 5)
Category Archives: Expenses
How do you claim R&D Tax Credits?
Research and Development (R&D) tax relief (or credit) is a company tax relief that can either reduce a company’s tax bill or, for some small or medium sized (SME) companies, provide a cash sum. It is based on the company’s expenditure on R&D.
For there to be R&D for the purpose of the tax relief, a company must be carrying on a project that seeks an advance in science or technology. It is necessary to be able to state what the intended advance is, and to show how, through the resolution of scientific or technological uncertainty, the project seeks to achieve this.
http://www.hmrc.gov.uk/manuals/cirdmanual/cird80150.htm
These are the key questions that you will be asked when requesting an R&D Tax Credit from HMRC:
- How was it decided that R&D had taken place
- A description of the scientific & technological advance sought
- The uncertainties involved
- How and when the uncertainties were resolved
- Why the knowledge being sought was not readily deducible by a competent professional
- Were any grants, subsidies or contributions received for the project within the claim
- Who owns the Intellectual Property of the products resulting from the R&D
- Was the R&D carried out for others ie clients, this could mean your claim is rejected
Amount of relief
For expenditure incurred up to and including 31 July 2008 SMEs can deduct 150% in respect of their qualifying R&D expenditure and the payable tax credit can amount to £24 for every £100 of actual R&D expenditure. For expenditure incurred on or after 1 August 2008 SMEs can deduct 175% in respect of their qualifying R&D expenditure and the payable tax credit can amount to £24.50 for every £100 of actual R&D expenditure. The rate is further increased from 1 April 2011 to 200%, and a payable credit of £25 for every £100 of spend.
Large companies can deduct 125% in respect of qualifying expenditure incurred up to and including 31 March 2008 and can deduct 130% thereafter.
Here is a template (originally created by HMRC but updated by me) to help you calculate the value of your claim it has references to relevant HMRC guidance.
The claim is made on your corporation tax return (CT600) if you discover that you should have made a claim in a prior year its not too late, follow this link to find out how to correct prior year returns http://www.hmrc.gov.uk/ct/managing/company-tax-return/amend.htm
Case Studies and Examples
Here are some excellent examples http://www.bis.gov.uk/files/file36112.pdf
It is possible to claim for software http://www.bis.gov.uk/files/file34845.pdf
Software could be tool to enable the R&D or a goal in its own right, but simply modifying existing software isn’t R&D. It has to follow the same rules as other R&D and be an advance in science and technology.
Construction companies have claimed R&D for developing new building systems and new building technologies.
R&D could be a new process rather than an invention.
It doesn’t have to have a patent but there could be advantages to having one, such as patent box tax relief.
steve@bicknells.net
Have you claimed Pre-Trading Tax Relief?
By the time you actually start trading, you may have spent thousands of pounds on research and setting up the business.
Provided you have formally notified HM Revenue & Customs that you have started up a business, most of these costs are usually allowable as business expenses in the first year.
Income Tax (Trading and Other Income) Act 2005
Pre-trading expenses
(1)This section applies if a person incurs expenses for the purposes of a trade before (but not more than 7 years before) the date on which the person starts to carry on the trade (“the start date”).
(2)If, in calculating the profits of the trade—
(a)no deduction would otherwise be allowed for the expenses, but
(b)a deduction would be allowed for them if they were incurred on the start date,
the expenses are treated as if they were incurred on the start date (and therefore a deduction is allowed for them).
http://www.legislation.gov.uk/ukpga/2005/5/section/57
http://www.hmrc.gov.uk/manuals/bimmanual/bim46355.htm
VAT Paid Before VAT Registration
You can reclaim any VAT you are charged on goods or services that you use to set up your business.
Normally, this will include:
• VAT on goods you bought for your business within the last 4 years and which you have not yet sold.
• VAT on services, which you received not more than 6 months before your date of registration.
You should include this VAT on your first VAT return. (Notice 700/1 Oct 2012 4.2)
CIMA can help you make a success of your new business, here is a checklist Making a success of your business
steve@bicknells.net
So you think your mileage claims are ok……..get ready for a shock
According to Tom Tom 72% of businesses felt mileage claims were over stated and 50% of businesses don’t regularly check mileage claims.
How do you monitor mileage claims from your employees?
The news could be even worse for contractors…
Its probably fair to say that most contractors who have an office at their home claim business mileage when they visit clients, but things could be about to change for the worse….
In what could become a landmark decision in the interpretation of “wholly and exclusively” allowable expenditure, a doctor has lost a protracted battle with HMRC over his business mileage claims.
After an enquiry lasting more than seven years and three tribunal hearings, the First-tier Tribunal led by Judge Kevin Poole acknowledged Dr Samad Samadian had a dedicated office in his home which was necessary for his professional activity.
Potentially, the decision has wide implications for all professional self-employed activity, where the business owner undertakes substantive work at home, but also has another business base at which they deliver their expertise regularly.
http://www.taxation.co.uk/taxation/Articles/2013/02/13/53821/way-go-home
It is understood that Dr Samadian will be appealing.
But this could lead to Consultants paying back thousands of pounds in tax.
steve@bicknells.net
Business Accountant 