Eureka! – R & D Tax Credit Claims

In a lather about research and development claims? MARIA KITT clarifies the subject

KEY POINTS

• The basics of research and development relief.
• Qualifying projects and SMEs.
• SSAP13, CTA 2009, Pt 13 and DTI/BIS guidelines.
• Qualifying expenditure and CTA 2009, s 1044 et seq.
• Capital allowances and claims under CAA 2001, s 437.

Once upon a time, the Chancellor of the Exchequer introduced a raft of generous tax incentives to encourage expenditure by UK companies on scientific or technological research.

Ten years on, the legislation has become more complex and unwieldy, and there can be no doubt that research and development (R&D) companies face a number of almost prohibitive obstacles to access the reliefs.

In 2009, the latest year for which figures are available, more than 8,350 companies claimed an estimated £980 million of R&D relief. This brings the total to more than £52 billion since the schemes were introduced.

Sister grant organisations paid £190 million in collaborative grants and a further £25 million through the R&D grant scheme in the year ended April 2010.

There are two principal tax relief schemes in the UK: the SME scheme and the large company scheme. There is also a scheme to provide relief for R&D on certain vaccines and medicines. In 2009, SMEs accounted for more than 82% of R&D claims.

Astonishingly, a whole HMRC industry seems to have been spawned around the regime, with more than 14 regional R&D units as well as the dedicated inspectors examining larger or complex claims in Large Business Offices.

Coupled with the apparently perpetual reform since its introduction, …