R&D

consultation / other / R&D — No Comments
20
Mar 13

UK: Another Budget, a bit more for IP businesses

Well, we have the shiny brand new patent box proposals coming in April anyway, so there were no big expectations of this Budget – just as well, really!

There was one ‘direct’ IP announcement – the above the line R&D relief for large companies is increased to 10%, from the originally proposed 9.1%. This doesn’t sound much of an increase, but it’s a large improvement on the 6% that the current large company relief would be worth when the 20% corporate tax rate comes into effect. A blog post on ATL is in the works …

A ‘coming soon’ announcement was also hidden in the Budget documents – the Government plans to introduce consultation on tax reliefs for the visual effects industry. Presumably these will be modelled on the film/quality tv/animation/video games reliefs that we already have, but there’s no detail yet beyond the announcement of consultation.

There were quite a few indirect announcements – things that will benefit IP companies by benefiting companies and sectors in general, including:

- the 20% corporation tax rate: a bonus for large companies, and fairly predictable
- the NICs allowance of £2,000 per business, reducing the costs of employing people
- the extension of the capital gains tax exemption on investment via SEIS: useful for startups looking for funding
- then the grants etc funding, including £1.6bn for Industrial Strategy, part of which will go into a £2.1bn fund for aerospace; a £15m competition for digital content production; and £8m for the Skills Investment Fund, focussed on the digital content sector
- and finally, various initiatives intended to make it easier to raise finance. In theory.

R&D — No Comments
02
Sep 12

UK: 2010-11 stats on R&D published

HMRC have published the latest set of annual statistics on R&D tax relief claims (external PDF), indicating a rise of almost 9% overall in the number of claims (9.6% rise for SME claims, 5.5% for large company relief claims, and 6.6% rise in SME subcontractor claims). The value of relief claimed rose by 7.7% to £1.1bn (£340m in SME claims, £750m in large company relief claims).

There’s some support to the view that the credits may increase R&D expenditure – R&D spend by SME claimants increased 11.3%, and the R&D spend of large company claimants was 8.3%. The SME spend is now consistently increasing year on year, after a rather flat first few years.  The effect of the economy also has to be taken into account; the increase in spend seems unlikely to be solely due to the credits, particularly in the large company where the relief is worth barely 7% of R&D spend. For reference, ‘background noise’ threshold on incentives is generally around 6% – where the benefit is less than that, it’s often too much hassle to claim the incentive.  Once we reach the 22% tax rate, the benefit of the large company relief will be 6.6% of expenditure.

This year, the stats show the regional and industry analysis for the first time. The regional analysis is largely useless, as it’s based on the registered office of the company and so has a disproportionate number in London and the South East. Tax returns don’t show where money is actually spent. The industry analysis shows claims are made overwhelmingly in the business services and manufacturing sector – no particular surprise, particularly as ‘business services’ is a catch-all covering everything from generic R&D to property.

Finally, it’s somehow comforting to see that vaccine research relief claims continue to trundle along at 10 per year, as they always have done. It’ll be a shock if and when that number ever changes (which it might: the vaccine research relief can no longer be claimed by SMEs, so it’s not impossible that the stats in a couple of years time will show a different figure).

consultation / R&D — No Comments
28
Mar 12

UK: Consultation on ‘above the line’ R&D credit published

The consultation paper on the proposed ‘above the line’ R&D tax credit has been published (pdf). Key points from a speed-read are below (responses due by 29 June 2012 – we have some time!).

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legislation / R&D — No Comments
15
Feb 12

UK: R&D qualifying bodies list update

The Research and Development (Qualifying Bodies) (Tax) Order 2012 has been approved by the House of Commons, to come into effect on February 28th, 2012. The Order updates the list of qualifying bodies for R&D purposes – contributions to qualifying bodies can be eligible for the large company R&D relief.

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consultation / R&D — No Comments
10
Nov 11

UK: large companies looking for R&D credit changes

In a report (pdf, on the SMMT website) published this week (and you have to love a report that starts with a quote from Julius Caesar), the manufacturing & motor associations EEF and SMMT call for changes to the R&D tax relief. They’re looking for a “cash benefit or redeemable credit at the point R&D costs arise”, rather than a “relatively opaque offset against corporation tax payments”.

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R&D — No Comments
06
Nov 11

UK: HMRC R&D pilot open for business

HMRC have kicked off their R&D voluntary advance assurance pilot, previously trailed in the summer consultation.

The pilot is available to small companies only (those with fewer than 50 employees) making their first R&D relief claim. HMRC will assign volunteer companies to an R&D Relief expert, to provide support and advice on putting a claim together.

The aim of the pilot is to agree a basis for the first R&D claim and claims for the two subsequent accounting periods; where the claims are made on the agreed basis, there should no query from HMRC in respect of those three R&D claims. It’s not absolutely clear, but it seems that the agreement is on a per-company basis rather than a per-project basis – HMRC is presumably hoping that these very small companies will have no more than one R&D project at a time.

Companies wanting to take part in the pilot should contact their specialist R&D Relief unit – more details on the HMRC announcement page.

Editor’s note: I’d be interested to hear from any companies that take part in the pilot – what was the process like, has it made it easier to deal with R&D, that sort of thing.

international / R&D — No Comments
01
Sep 11

Australia: new R&D tax credit

A new Australian R&D tax credit has replaced the old R&D concession for tax years on 1 July 2011 (although the relevant bills were not passed until late August).  The new regime provides a 45% repayable credit on unlimited R&D expenditure for groups with turnover of less than Aus$20m, and a 40% non-repayable credit for groups above that threshold. SMEs will be able to get quarterly repayments from 2014, to improve cash-flow and encourage reinvestment in R&D.

These credits are an increase on the old regime, paid for by a restriction on the types of R&D that will qualify – the definition has been tightened up, focussing on experimentation.

consultation / R&D — 2 Comments
05
Aug 11

UK: Draft guidance on R&D relief for production costs

Three months late (it was promised for mid-May), the draft of the revised HMRC guidance at CIRD81350 on “production” for the purposes of the R&D tax reliefs has finally been published (PDF).

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consultation / other / R&D — No Comments
15
Jun 11

UK: R&D consultation, next round

In addition to the patent box paper, the Treasury also published the next round of R&D consultation – this is rather more a summary of responses to the last consultation than new information.

In summary:

  • not ruling out ‘above the line’ R&D relief/credit but the Government still needs to be convinced
  • large company subcontractor costs to qualify for the subcontractor only where the subcontractor is aware that it is qualifying R&D and has evidence to this effect
  • no plans to extend qualifying expenditure to cover (eg) rent of premises used for R&D
  • draft legislation in the Autumn to allow a wider range of externally provided workers to qualify
  • no plans to restrict internally created software from being qualifying costs
  • improved guidance on whether prototypes will be qualifying R&D – whether the ‘uncertainty’ principle applies
  • plans for a pilot scheme will be brought in during the Autumn so that small companies and start-ups can get advance assurances that can be relied on in making R&D claims for several years

The Government is looking for specific responses (by 2 September 2011) on:

  • qualifying indirect activities: should the relief be retained?  (QIA are hard to define and harder to get relief for)
  • should there be some form of certification or election process to provide certainty for subcontractors as to whether the work they are doing is R&D?
  • does the removal of the PAYE/NICs limit on the repayable credit require any safeguards?
  • does the ‘going concern’ definition need to be reformed, to make it closer to that for EIS/VCT?
international / R&D — No Comments
12
May 11

US: LA tax credits for games industry

The state of Louisiana gives a 35% state payroll tax credit on all Louisiana labor directly involved in the development of video games (and so doesn’t include administration or executive work) and a 25% tax credit on all the direct support costs such as premises leases, computers and training.  The state estimates these reliefs reduce the cost of doing business in the games industry in the state by around 30% overall.

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