Category Archives: R&D

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.

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.

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?

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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UK: The Budget & IP

Headlines:

  • R&D tax relief increased for SMEs to 200% in 2011 and 225% in 2012
  • R&D tax credit repayment no longer restricted by PAYE/NICs
  • R&D large company relief to include sub-contractor costs
  • Patent box to have more consultation – still 10%, still patents only, applying from 1 April 2013
  • Capital allowances for short-life assets now 8 years – useful for capital expenditure that doesn’t qualify for R&D allowances, and exceeds the annual investment allowance
  • Reductions in corporate tax rate useful to all companies
  • Enterprise Zone changes could be attractive
  • 24 new University Technical Colleges to be established

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UK: R&D tax relief claims creep up

HMRC  has published the latest set of details on the number and value of R&D tax relief and R&D tax credit claims, covering claims in 2008-9.  There is an increase in the number and value of claims, but it is surprisingly small considering that 2008-9 was the catch-up deadline to get in claims for relief on expenditure over the previous six years (the relief now has to be claimed in the company tax return or amended return).

The total number of companies claiming the relief was 8,.350 in 2008-9 – that seems a very low number, and it may make the scheme vulnerable to change/removal in the upcoming consultation on how IP is taxed in the UK.

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EU: where to charge VAT on certain R&D activities

Kronospan Mielec sp zoo v Dyrektor Izby Skarbowej w Rzeszowie (Case C-222/09): the ECJ confirmed that where R&D services carried out by engineers are supplied  ‘on a contract basis for the benefit of a recipient established in another Member State’, they were ‘services of engineers’ and so the place of supply is the country in which their work is carried out, not the country from which they are supplied.

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