Research & development tax relief

R&D tax relief is a Government incentive to reward companies undertaking research and development.

Small and medium sized enterprise relief

The small and medium sized enterprise (SME) relief offers an additional tax deduction of 125% of qualifying expenditure on eligible R&D activities as well as the ability to claim a cash back repayment from HMRC.

Reform of large company relief

The large company R&D relief is in the process of being reformed to become an to an ‘Above The Line’ (ATL) R&D credit from 1 April 2013 – as announced in the draft Finance Bill published on 11 December 2012.

The benefit is no longer in the tax line but is offset against the R&D expenditure. Effectively, it is more like a grant, reducing the cost of UK R&D and making the UK globally more competitive. This will enable R&D budget holders to see the benefit of the credit in the numbers they are responsible for and this increased visibility should make the credit more effective in influencing investment decisions.

The definition of R&D activities may be broader than you think. If you’re developing new or improved products, process, services or systems you could achieve significant additional tax savings by making an R&D claim, or real cash rebates from HMRC in some cases.

You have up to two years after the financial year end to submit R&D tax relief claims.

We have considerable experience in assisting companies with making R&D claims as well as extensive knowledge of the legislative environment. Having worked with HMRC for a number of years, we can guide you through the claim process to ensure your claims are submitted correctly.

In particular we can:

• Navigate you through the process with as much, or as little, assistance as you desire. By passing knowledge to your employees, we’ll help them to become more self sufficient in making claims for future years
• Help you to interpret the qualification criteria - many companies incorrectly rule themselves out by failing to recognise qualifying activities and costs
• Improve your claims process by putting in place effective long term reporting systems compliant with HMRC requirements and agreeing methodologies with HMRC on your behalf.

PwC Tax Research & Development (R&D) team: Best Big Four Tax Team 2012

Our R&D team were awarded this title for their work in supporting businesses and HM Treasury in changing the R&D relief to an above the line credit, a change that businesses have indicated will make the R&D credit much more effective in influencing investment decisions. For several years our team have worked closely with businesses and HM Treasury to understand the impact of the proposed measures, including undertaking and presenting to ministers an economic analysis of the impact of changing to the new scheme.