InfoLab21

Nigel Holmes joined Armstrong Watson in 1992 and qualified as a Chartered Accountant in 1994. He moved into tax in 1996 and became a Chartered Tax Adviser in 1998. He specialises in tax planning for companies with research and development tax relief being a particular strength.

Nigel Holmes from Armstrong Watson shares his insight into why some companies may be missing out on the R&D Relief Scheme.

Is Your Company Missing Out On A Generous Tax Relief?

Research & Development tax relief is an extremely generous tax relief available to companies carrying out R&D. This is not just for pure science companies. Indeed many successful claims are made by engineering, IT and manufacturing companies too. In my experience working in this field, many companies are missing out on claims due to various perceived barriers. Some of the most common of these are:

"We are not doing R&D." Many companies do not initially realise that their project is R&D.

"Claiming the relief is complicated." Not if you seek good advice.

"The costs of claiming outweigh the benefits" This is rarely the case.

"We cannot separately identify costs." HMRC does not expect the company to reinvent its accounting records to make a claim and will accept some elements of estimation.

"We received a grant towards R&D, we cannot have the tax relief too." This is by far the biggest misconception. The receipt of a grant may affect how much additional tax relief the company can claim but you can have both!

The claim can give rise to substantial tax savings or even create a cash refund for loss making companies, and future planned changes will make the relief even more generous in future. For example, a company that spends £20,000 on qualifying costs will save a minimum ADDITIONAL £2,000 in corporation tax.

Good advice is recommended though as the rules can be complex and HMRC have a specialist R&D unit that checks the claims.

I'm very interested to hear about your experiences the R&D tax relief scheme. Have you been successful? Was the process too daunting to take on? Have you learnt valuable lessons other might benefit from? Please comment below.

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Tue 11 October 2011

Associated Links

• R&D Relief schemes (HM Revenue & Customs)