4,500 small businesses are claiming research and development tax credits each year according to an HMRC guide on R&D tax credits for small businesses.<\/p>\n
Qualifying\u00a0R&D expenditure helps reduce\u00a0a company’s corporation tax bill but with such a small number of companies participating, either the scheme is\u00a0unknown or there are not many innovative small companies in the UK.<\/p>\n
Following is a brief overview of the R&D tax credit system.\u00a0Ask your accountant for more details to see if your company\u00a0can benefit.<\/p>\n
R&D Tax Credit<\/strong><\/p>\n Qualifying R&D expenditure reduces\u00a0your profits chargeable to corporation tax and therefore reduces your corporation tax bill. Put simply, your company\u00a0pays less\u00a0tax.<\/p>\n What is R&D?<\/strong><\/p>\n Expenditure that qualifies for R&D adheres to these general rules:<\/p>\n Eligible R&D Costs<\/strong><\/p>\n Restrictions<\/strong><\/p>\n HMRC provide a useful flow chart to gauge whether expenditure is eligible for an R&D tax credit: R&D Tax Credit Flowchart.<\/p>\n R&D Tax Credit Example<\/strong><\/p>\n Ordinarily, expenditure that is wholly and exclusively for business purposes is an allowable expense for corporation tax. For example, if you spend \u00a350,000 on salaries then\u00a0100% of that salary cost (i.e. the full \u00a350,000) is eligible to reduce profits chargeable to corporation tax.<\/p>\n Assume SME corporation tax is set at 21%. \u00a350,000 normal expenditure effectively reduces a corporation tax bill by \u00a350,000 * 21% = \u00a310,500.<\/p>\n The R&D tax credit permits 175% (from 1 August 2008) of qualifying expenditure in SMEs to offset profits chargeable to corporation tax. If the salary cost referred to above qualified as R&D then \u00a350,000 * 175% = \u00a387,500 is eligible to reduce profits chargeable to corporation tax.<\/p>\n Assume SME corporation tax is set at 21%. \u00a350,000 R&D expenditure reduces a tax bill by \u00a387,500 * 21% = \u00a318,375.<\/p>\n \u00a350,000 expenditure qualifying as R&D saves an additional \u00a37,875 in tax (\u00a318,375 – \u00a310,500).<\/p>\n","protected":false},"excerpt":{"rendered":" 4,500 small businesses are claiming research and development tax credits each year according to an HMRC guide on R&D tax credits for small businesses. Qualifying\u00a0R&D expenditure helps reduce\u00a0a company’s corporation tax bill but with such a small number of companies […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-298","post","type-post","status-publish","format-standard","hentry"],"yoast_head":"\n\n
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