Research & Development Tax Relief
We at Bingham & Jones are very happy to be able to provide companies who are potentially looking at R&D/NPD projects with a detailed illustration of the tax incentives that are available to them for engaging our services. This illustration has been put together for us by our Accountants, MJH Accountants in Preston and it makes for some good reading;
Research and Development tax relief (R&D) is a tax break provided by the Government to incentivise UK companies to innovate and develop new products/processes. The relief is very generous, especially for small and medium entities (SME);
An SME is a company with;
Fewer than 500 employees
and/or
Turnover < €100m / net assets of < €86m
In-house R&D
SMEs save 46% of their R&D spend off their tax bill or, if they are loss making can get up to 33% of their R&D spend as cashback.
If an SME is ineligible (which can be due to having received grant funding or sometimes if is linked with other businesses) it may be able to claim under the large company scheme.
Large companies can claim cashback of 8.8% after tax which as you can see is nowhere near as generous as the 33% available to SMEs!
Subcontracted R&D – As subcontractor
If an SME carries out R&D work on behalf of other non-SME companies, then they can claim cashback at large company rates, i.e. 8.8%!
Large companies can also claim the 8.8% cashback as long as they are being contracted by another large company.
No relief is available if the work is being undertaken for an SME company.
Subcontracted R&D – The engager
If an SME engages another company to undertake R&D, they can still claim SME tax relief on 65% of the expenditure (or on the sub-contractors relevant costs if higher and a joint election is made) thus saving 36.9% of the costs.
Large companies can also claim the 8.8% cashback as long as the work is being done for a non-SME company
IN SUMMARY
For every £10,000 invested in Bingham & Jones' expertise to undertake £1,000 qualifying R&D work for your company, the net cost to you would be £6,310 for an SME or £8,000 for other companies.
