R&D Tax Credit

R&D Tax Credit

How do I know if my business is eligible for R&A tax credits?


How do I know if my business is eligible for R&A tax credits?

Research and Development (R&D) relief is a corporate tax relief that reduces your company's or organization's tax receipts more than you actually spend on allowable research and development costs.

If your company or organization is a small and medium-sized enterprise, you can choose to get a tax credit for the amount of cash paid by HMRC.

But your company or organization can apply for R&D exemption only if it bears corporate tax.

The relief rate of this plan is higher. From August 1, 2008, the allowable tax deduction for R&D costs will be 175%. That is to say, for every 100 pounds eligible cost, your company or organization's income (income from paying corporate tax) can be reduced by another 75 pounds on the basis of 100 pounds spent. In some cases, it also includes letters of credit payable.

If your company is a small and medium-sized enterprise, you can only get tax credits if you are a continuing business. This means that its newly published accounts are prepared on the basis of going concern, and nothing in the accounts indicates that its status (as going concern) depends on whether it receives R&D credits or tax credits. If your company or organization is no longer a continuing business after filing a claim but before paying any credit, HMRC considers the claim as pending and you cannot obtain a tax credit.

Which R&D projects can be relieved

If a R&D project attempts to achieve progress in the overall knowledge or capability of science or technology by addressing the uncertainties of science or technology, not just in its own state of knowledge or capability, then your company or organization can only request R&D relief. See below to see what this means and how to show that the project meets these terms.

In addition, for the accounting period ending before 9 December 2009, the project must satisfy the following two conditions at the same time:

For the accounting period ending on or after 9 December 2009, only the first condition applies.

For more information on R&D tax credits, please visit the UK Tax and Customs website.

Or you can call a professional R&D department. The units you want to contact depend on your tax area. For more information, please visit the above website. You should talk to your certified public accountant, who may have experience in dealing with R&D tax credits claims from other companies and will know about your company. The definition of qualified R&D expenditure is very strict and can be quite technical.

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