Expenditure on research and development (R & D) undertaken by UK businesses is continuing to grow, according to the latest government bulletin, currently standing at £23.7 billion in 2017, an increase of 4.9% on the previous year.
It is helped along by generous tax breaks which are available for innovative firms looking to make a breakthrough in science or technology.
Today there is scope for a business to claim additional tax relief on an element of the costs incurred in overcoming any R & D uncertainty.
Instead of 100% of the cost being an allowable deduction for corporation tax, 230% of the cost can become an allowable deduction.
In addition, where this results in a taxable loss or the business is loss making, a tax refund can be applied for.
So no surprise then that claims for R & D tax relief are on the rise and whilst this is actively encouraged, we are also, inevitably, seeing abuse in the market place. The rules are quite specific in what expenditure can and cannot be claimed.
HMRC reminded businesses of this in its latest Budget 2018 announcementafter it had identified and prevented £300milion worth of fraud linked to the relief, mainly coming through people setting up artificial corporate structures.
HMRC also offer a process of Advanced Assurance, for businesses with fewer than 50 employees and turnover under £2 million.
Advanced Assurance is a highly worthwhile process and offers businesses peace of mind that any claims covering the first three tax periods are agreed with HMRC (subject to there being no deviation from the detail of the claim at the time Advanced Assurance was granted).
Here at Langricks we have helped businesses navigate through the Advanced Assurance process. They get great benefit and comfort over that three year period knowing that the tax relief from an R & D claim can be reinvested in the business to assist with future growth, without the fear that one day HMRC could disagree with historical claims made resulting in repayments, interest and potentially penalties.
For complex claims, we would always recommend the use of a reputable firm – there are some boutique organisations providing aggressive claims that could come back to bite those swayed by them .
For businesses looking to use R & D to further their enterprises Advanced Assurance relief is well worth having and is already proven to encourage progress and growth, not just for individual businesses, but for the UK as a whole.