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SHAREDAMB I T ION
RESEARCH &DEVELOPMENT
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W H AT A R E R & D TA X C R E D I T S ?The Government
regards investment in research and development (R&D) as crucial
to economic success. R&D tax relief is designed as an incentive
for UK companies to invest in innovation. The relief can be
extremely generous and enables the company to accelerate its
R&D programme and invest a greater proportion of its profits
into such things as hiring new staff or investing in new
machinery.
W H AT I S E L I G I B L E R & D ?The scope of what is
covered under R&D may be broader than you may think. If there
is some element of your work that you cannot do - and to do this
you need to create a solution which isn’t available on the
marketplace - then you may be eligible to claim R&D tax
credits. This could be using technology in a new way or even
designing new technology to improve or create a process, device,
service or product to ultimately mean that you can run and grow
your business.
P K F F R A N C I S C L A R K H AS A S P E C I A L I S T R &
D T E A M W H O H AV E E X P E R I E N C E AC R O S S A B R OA D R
A N G E O F B U S I N E S S S E C TO R S . T H E I R E X P E R T I
S E H AS I D E N T I F I E D N U M E R O U S O P P O R T U N I T I
E S F O R C L A I M I N G R & D TA X R E L I E F W H E R E T H
O S E I N T H E B U S I N E S S B E L I E V E D T H E R E W E R E N
O N E .
H O W D O E S I T W O R K ?Once eligible activities have been
identified, a company may look back to the last two accounting
periods for the associated qualifying R&D spend on permanent
and temporary staff costs, materials used (including utilities),
subcontractors and software licences. Relief is then claimed under
one of two schemes.
R&D for small to medium businesses
The SME scheme (broadly for those with fewer than 500 employees)
is the more generous but comes with complex conditions. Relief is
claimed in the company tax return and is given by way of an
enhanced deduction from taxable profits and a reduced tax liability
of up to a quarter of the qualifying spend. If the company has
current year losses, it may claim a payable cash credit of up to a
third of the qualifying spend.
R&D for large businesses
Large companies claim a research and development expenditure
credit (RDEC) calculated at 12% of qualifying R&D spend (c.10%
net of tax) and recorded as income in the profit and loss
account.
Capital expenditure is not eligible for relief under either
scheme but can instead attract research and development allowances
(RDAs) which provide an accelerated 100% deduction from taxable
profits.
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HOW DO YOU QUALIFY?If you can answer yes to any of the following
questions you may do!
Do you manufacture anything?
Do you carry out design work?
Have you developed your own software?
Have you developed processes to improve efficiency?
Have you experimented with new equipment or production
techniques?
Have you produced prototypes or used pre-production tooling?
Have you been unsure at the beginning of a project as to how the
issues will be resolved?
Have you reduced waste from your processes or reused it in a
novel way?
Have you developed new tools, products, processes or services
using technology
Failed projects are also eligible. In fact failure is a good
indicator that there was R&D as the technological issues could
not be overcome.
If you have worked in collaboration with other companies or
employed them to help with the projects this can also be considered
as part of the claim.
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K E Y S E C T O R S A N D E X A M P L E P R O J E C T S
Food & drink New recipe development to meet consumer demand,
government regulations or dietary requirements.
Agriculture New methods of planting and harvesting using robots
to use land which would otherwise be dangerous to farm.
Software development Development of new programming techniques
and algorithms in order to achieve a technological advance.
E-commerce Development of a software package which could handle
vast amounts of data regarding product lines and numerous pricing
structures per item.
Manufacturing & engineering New process development to
improve efficiency or increase output.
Construction & architecture Development and application of
new or unusual building materials and novel construction
techniques.
Waste management & recycling Development of a process to
recycle heavily contaminated material or mixed waste streams.
Renewables New methods of harnessing or storing renewable
energy.
Marine New propulsion system or hull form design possibly
leading to increased performance characteristics.
Chemical, life sciences & healthcare Development of a
manufacturing process for clinical trials of a new cell
therapy.
These examples are for illustration only. There are countless
other projects that could qualify. Whilst the sectors mentioned are
those we see as being most likely to qualify for a claim, that does
not mean others wouldn’t. Please get in touch to find out more.
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HOW WE CAN HELP
Gathering information:
• We will determine which of the two schemes apply
• We will either visit you at your premises or have a call to
further understand the business, to determine potential projects
and qualifying activities
• We will then help you to gather the financial information we
need to produce the financial side of the claim
Identifying costs:
• We will make sure that the claim includes all applicable costs
in order to maximise the claim
• We will produce a first draft of both the report and the
figures and share these with you for your approval and comment
Processing the claim:
• We will work with your tax adviser to help with the
preparation of the tax computations and submission of the claim
• We will support you fully in the event of a query from
HMRC
Transparent fee - we will agree a fee structure with you that
reflects your circumstances:
• A fixed fee quote, where it is reasonably clear that a R&D
claim can be made
or
• A contingent fee based on the amount of tax benefit secured
where the claim is less clear and requires considerably more time
investment on our part to determine the existence and amount of the
claim
W E H A V E A P R O V E N T R A C K
R E C O R D O F S U C C E S S F U L
C L A I M S A C R O S S M A N Y
S E C T O R S . O U R S P E C I A L I S T
I N N O V A T I O N A N D T E C H N O L O G Y
T A X G R O U P C O M P R I S E S O F
T A X S P E C I A L I S T S A N D A T I M E
S E R V E D E N G I N E E R , A L L W I T H
E X T E N S I V E K N O W L E D G E O F
T H E R & D T A X R E L I E F S C H E M E .
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C O M P L E M E N TA R Y S E R V I C E S F O R I N N O VAT I V E
A N D E N T R E P R E N E U R I A L B U S I N E S S E S
• Patent box• Group v parallel
structure• Overseas
expansion• Company share option plans (CSOP)
• Flowering shares• Enterprise
management incentive (EMI) scheme
• Seed enterprise investment scheme (SEIS) and enterprise
investment scheme (EIS)
• Grants
• R&D tax relief
• Creative industries relief
• Choice of business structure
• Effective loss utilisation
Star t up
Produc t development
Fundrais ing
At trac t ing/ re ta in ing k ey people
Growth & profi t
Exit
• Entrepreneur’s relief (ER)
• Management buy out/ management buy in (MBO/MBI)
• Consideration structure
• Post exit wealth management
623711880
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UK SMEs now trade all over the world and need expert advice and
support to do so.
Planning is crucial. It is important that those key early
decisions help you share your future success and avoid unnecessary
mistakes.
PKF Francis Clark has assembled a team of corporate and business
tax advisers who routinely deal with international tax issues
working with our colleagues across the global PKF network.
E X I T A N D S U C C E S S I O N
It is important for fast growing, entrepreneurial business to
consider an exit strategy, whether that be a sale to a third party,
a management buy-out, or on a partial exit where a private equity
house or venture capital is simultaneously making an
investment.
Our tax team is experienced in helping clients manage the tax
issues arising on an exit.
Our corporate finance team also have extensive and relevant
experience, with team members having worked for debt and equity
providers (including a number of investment banks) and for the ‘Big
4’.
Fast growth companies are often funded by equity raised from
high net worth individuals hoping to benefit from tax favoured
investment relief in the form of SEIS and EIS.
The benefits of the scheme include deferral of current capital
gains, an income tax credit, and an exemption from capital gains
tax on the sale of the qualifying shares. Both schemes are complex
and specialist advice is recommended.
We regularly advise businesses on whether the company and the
investors qualify, obtaining advance assurance from HMRC to confirm
qualification, valuation, and then reporting the investment to HMRC
to obtain the scheme benefits.
A key part of any fast growing business is ensuring that the
best talent are attracted and then retained. Good people are always
hard to come by.
Typically we see most businesses consider an EMI option scheme;
however in certain circumstances this may not be appropriate and
instead we may consider a CSOP, growth shares, partly paid shares
or a phantom share scheme.
We advise many of our clients on how a share scheme or equity
incentive plan can help attract the best people and then retain
them once in the building.
We have a dedicated team in this area with years of experience
of advising in a ‘Big 4’ environment.
AT T R AC T I N G A N D R E TA I N I N G K E Y P E O P L EE Q U
I T Y I N C E N T I V E S
G R OW T H A N D P R O F I TI N T E R N AT I O N A L E X PA N S
I O N
F U N D R A I S I N GS E I S / E I S
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K AT I E FA R L E Y
TA X S E N I O R M A N AG E
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R I C H A R D T Y L E R
TA X S E N I O R M A N AG E
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S A R A H B OY E S
TA X M A N AG E [email protected]
M E E T T H E T E A M
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