Frequently Answers & Questions

About R & D Tax Credits

What are they?

In essence a very valuable Latin taxo) is a mandatory financial charge or some other type of levy imposed upon a taxpayer (an individual or other legal entity) by a governmental organization in order to fund various public expenditures.”>tax break or relief for companies who perform or undertake activities or work that complies with HMRC’s qualifying criteria.

What’s its purpose?

It’s one of the ways in which the Government invests in businesses. Investing in businesses in the UK generates a cycle of innovation and productivity, including employment, home grown business success, exports to name a few, whilst also improving the economy and GDP of the Country.

What constitutes Qualifying Expenditure?

The areas that can qualify are numerous, but would usually include an element of risk and uncertainty (ie. when you embarked upon the project, you knew what you wanted to achieve, but didn’t know exactly how to get there) and what you required could not be ‘bought off the shelf’.

What types of costs can I claim against?

Costs normally fall into 3 primary categories, 1) Raw costs, 2) External costs and 3) Internal costs and could include items such as staff time/costs, consumables, utilities, travel costs and sub-contractor costs. As a specialist R&D firm, we have a detailed understanding of Research & Development practice and legislation and will conduct a detailed audit of your business to ensure that every opportunity for Research & Development tax relief is identified.

What could an R&D Claim be worth to me?

A successful R&D Claim can provide many things; not least it’s a tax relief to help your business and can take the form of one or more of the following:-
  • A Cash Refund directly from HMRC
  • A reduction in the Corporation Tax you would have to pay
  • Eliminating your entire Corporation Tax liability
  • Providing a Refund of Corporation Tax paid in previous years
  • Offsetting future Corporation Tax liability

Cash refunds can be used to fund ongoing research and development or simply just provide cashflow or the ability to invest in growing your business

Is my Company missing out?

Possibly. There are many companies that just don’t think Research and Development applies to them or don’t understand it or have been wrongly advised. Don’t let your Tax Relief go unclaimed – talk to one of our advisors who should be able to quick assess whether you may be missing out.

How far back can we claim?

Claims can be submitted on an ongoing and yearly basis, with your first Claim being able to go back to the 2 previous Accounting Tax Years.

How much time will I need to allocate?

This will of again depend on size and complexity, however on average it would be up to a day of your time spread over the 4 – 8 weeks.

Can I do my own R&D Tax Credit Claim?

You can, however and in our experience the time and costs associated in preparing your own Claim and the relevant supporting information, narratives and reports are likely to far outweigh having a Company who specializes in R&D working for you.

In addition, our specialist knowledge enables us to uncover all cost areas that conform with the criteria and will yield the highest amount that you can claim.

We also understand and keep abreast of all the latest R&D legislation and HMRC rules meaning your claim receives the expertise gained over many years and 1000’s of claims. We also speak to HMRC daily and have a strong and proactive relationship with them.

Can you provide some examples of R&D areas?

Typically areas of qualifying expenditure and separated into the ‘Projects’ a company undertakes. These can range from:
  • Designing / making Products or Solutions
  • Ongoing Product Development / Enhancements
  • Prototypes and Testing
  • Applications and Platforms
  • Software and Systems (incl. integration / customisation)
  • Technical and Engineering Solutions
  • New Processes and Procedures

Would my Business qualify?

If you’ve incurred costs and made, improved, implemented or generally spent monies of building a great company, then the chances are that you will have some R&D qualifying expenditures and would be eligible for R&D tax Credits.

Is there any minimum criteria?

Yes, you must be a Limited Company and an R&D Claim can only be submitted after your first full or even part Accounting Year

You do not however need to be paying any Corporation Tax in order to qualify, nor do you even need to be revenue generating (really good for start-ups and companies taking a product/service/solution to market).

What is your success rate?

Once a Claim is submitted, its 100%. Our processes and due diligence are designed to ensure that only valid and substantiated Claims are submitted. Its quite easy for us to determine early on in the process whether a Claim is likely to exist or not.

How long does the process take?

The process generally takes between 4 and 8 weeks to be completed and submitted and does depend on complexity or projects and obtaining supporting costs / information.

How long before HMRC determine my Claim?

Our processes and systems result in most claims taking no more than 28 days to be determined and paid.

Are R&D tax relief schemes considered tax avoidance?

No. This is a Government scheme fully supported by the Treasury and HMRC. It has been in operation since 2000.

About Capital Allowances

What are they?

Capital allowances are a tax relief available when buying, constructing or improving certain types of properties. The relief enables individuals or businesses to deduct the cost of certain types of expenditure from their taxable income, thereby reducing the amount they pay tax on.

Can I claim Capital Allowances?

Yes, if you pay UK tax and own the freehold of a commercial property including furnished holiday lets or you have redeveloped a leased property and you have paid for the plant and machinery contained in the property.

What is commercial property?

Commercial property can include shops, offices, warehouses, furnished holiday lets, hotels, restaurants, care homes, public houses, factories or industrial units. Commercial property which is purchased or leased by an individual or business will qualify for capital allowances provided it is not held in a pension fund or owned by a charity.

Why is so little known about Capital Allowances?

Whilst these allowances have been available for a number of years, this is a very specialist area requiring a team of tax specialists and surveyors to identify the allowances and formulate a legitimate claim.

The property is owned by my pension scheme, can I still claim?

Unfortunately not however if you transferred the property to yourself then you can claim or if you sell the property to a 3rd party then they may be able to claim.

Does claiming Capital Allowances affect my Capital Gains Tax position when I come to sell my property?

No, claiming Capital Allowances does not affect your CGT position. It is a common mistake to think that claiming Capital Allowances will reduce your base cost of the property (what you paid for it) therefore increasing the capital gain (the difference between what you paid for it and what you sell it for) when you come to sell. This is not the case.

What can I claim Capital Allowances on?

Plant and machinery assets can include fixtures and fittings and items other than the moveable furniture etc. These more integral fixtures can include carpets, air conditioning, swimming pools, sanitary ware, kitchens, heating, emergency lighting and wiring to fixed plant, fire equipment, telecommunication installations, signs and security systems. The list of qualifying items is lengthy.

I bought a Commercial Property more than 10 years ago, can I still claim?

Yes – as long as you still own the property then it doesn’t matter when the property was purchased.

Will my accountant have already claimed this for me?

No – All accountants have a general understanding of Capital Allowances. However, very few possess the in-house technical, legal and surveying skills to produce a full Capital Allowances report on a commercial property.

How will HMRC be involved?

HM Revenue & Customs created capital allowances legislation in order to encourage more investment into commercial properties from individuals and business. All claims have to be submitted and approved by HMRC before any tax relief/benefits will be given. Our specialist team will liaise with them to find and identify allowances for you.

About Patent Box

What is a patent?

A patent is a licence or grant issued by the Government (specifically the Intellectual Property Office for UK patents) to the inventor that provides the individual/company with the right to prevent anyone from exploiting the invention.

Is there criteria for qualifying for a patent?

Yes. Patents can be applied to most areas of technology, however it would need to pass the initial ‘golden rules’, which are that:-

  • It must be ‘novel’ – ie. can not be available or visible anywhere (eg. online / public domain) prior to the patent application being filed.
  • It must ‘involve an inventive step’ – must contain technical differences to any current or similar inventions.
  • It must be ‘susceptible of industrial application’ – ie. capable of being put into an industrial application.

What are the main reasons for having a Patent?

Although the primary reason is likely to be to guard against someone copying your invention, the tax incentives (ie. Patent Box) are now such that if you anticipate generating profits from the same, then investing in a patent at the outset could have a significant impact on the price you go to market at, funding or investment and of course your bottom line.

What income streams qualify?

Worldwide income on

  • Sales of patented products
    Products that incorporate patented items.
  • Licence fees or royalties for rights granted over patents and associated IP.
  • Income from the sale of patents, rights or exclusive licences.
  • Income received from damages for patent infringement.

Please note that the above isn’t an exhaustive list and some have sub-criteria.

How far in advance should I plan?

In advance for sure. Is not uncommon for the decision around applying for a Patent to come down to three things, namely – value, time and cost.

However Patent Box and the tax benefits now gives an additional and significant reason for considering a Patent application.

What Patents qualify for Patent Box?

Primarily only UK Intellectual Property Office and European Patent Office patents qualify although patents from other EEA states may be eligible.

Should I apply for a Patent?

It depends on your circumstances and invention, but if you’ve invented something, then it is usually a good idea to protect it.

What is Patent Box?

Patent Box is a regime that rewards companies with approved patents by reducing the rate of Corporation Tax to 10% on profits derived from revenues generated by the patented products/processes.

Can I apply for a patent myself?

Absolutely. However patent applications are typically rather complex or moreover need to be specific and quite detailed in order to a) obtain a successful Patent and b) ensure that the protection afforded covers all the ‘elements and angles’ Ie. materials, variations and the various iterations your invention has undergone.

What are the Costs for a Patent?

The application fees and options are fixed by the governing bodies and jurisdictions (ie. the UK IPO or European EPO)

However the fees charged by Patent Lawyers to prepare the submission do vary, so its worth shopping around and of course will largely depend on the complexity of the invention.

Any other good advice?

  • Patent Box is an opt-in benefit and must be applied for.
  • The benefits will still accrue whilst your patent is pending.
  • A company will need to claim the relief through their corporation tax return.
  • A companies structure and any other reliefs claimed (eg. R&D) should be taken into account in order to achieve the most effective outcome.
  • Do you need some advice – contact us now for a consultation.
  • Can you recommend any Patent.
  • Lawyers – for sure, we’ve worked with several that we are happy to recommend.

These questions do not solve your doubts?

info@m3tax.co.uk

03333 444 360

Contact Us