R&D tax credits and Patent Box – could your business benefit from the latest changes?
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According to R&D tax expert at Grant Thornton, Sarah Goodman, many Yorkshire business are failing to make the most of tax relief available to them. Many companies still believe that the scope to claim relief is restricted to those in white lab coats, but Sarah explains that the remit stretches far beyond this. With the economy still looking as bleak as the British weather, access to funding for many businesses remains a challenge. Making the most of generous tax reliefs could provide an alternative route for companies to achieve significant cash injections to fund innovation and growth. With yet more changes planned by the Treasury from April 2013, now is the time for businesses to consider what the changes mean for them and how to gain maximum benefit. The Government strategy for economic growth has long since centred around technology companies, with research and development (R&D) tax credits first introduced to the UK back in 2000. More recently, the Government has embarked on a significant programme of changes to the UK corporation tax system with view to making the UK the most attractive place in the G20 to invest for hi-tech innovative companies. The R&D tax regime has undergone many changes since it was first introduced, with more changes expected to apply from April 2013. The enhanced deduction for SMEs increased yet again from 1 April this year, allowing companies to save up to an additional 30p for every £1 spent on R&D on their corporation tax bill. The key test for HM Revenue and Customs is whether a company is advancing knowledge in a sector and is engaged in activity which involves genuine technological uncertainty. It is important for companies to think as widely as possible. This is designed to encourage companies to undertake more R&D in the UK. With the benefit accounted for in operating profit, the impact of the R&D spend becomes more visible to investors and stakeholders. Loss-making companies should immediately benefit from their qualifying R&D activities, with the regime expected to involve a payable cash credit rather than an enhanced deduction – a useful cash injection for business, and the simplicity with which the relief is calculated will bring greater certainty to claimant companies. April 2013 also sees the introduction of a new regime – called the Patent Box. Its aim is to “to provide an additional incentive for companies in the UK to retain and commercialise existing patents, and to develop new innovative patented products”. Following a phased introduction, companies will be able to pay tax at the rate of 10% on qualifying profits that fall within the patent box regime. This is a substantial reduction compared with the main rate of corporation tax, which will be 23% when the patent box regime is introduced next year. The recent changes and potential developments to the tax regime are good news for Yorkshire business, providing a tangible benefit to invest in innovation. To find out more, contact Sarah Goodman at Grant Thornton on 0113 245 5514. More articles in
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