Areande, You and Research & Development Tax Relief – Enable Your Innovation

1. Areande, You and Research & Development Tax Relief – Enable Your Innovation Providing a modern, progressive approach to tax relief, Areande is home to world-class experts on tax, whilst utilising the pinnacle of cutting-edge technology and utilising market- leading internal tax relief processes to ensure that your research and development tax reliefs are dealt with in a swift, professional manner. Facilitating and rewarding enterprise & innovation, research & development tax credits have become a useful tool for companies which seek to facilitate sustained growth and progression, whilst also mitigating many of the various risks and financial obligations associated with entrepreneurial ventures. In theory, the objective of research & development tax credits is to provide relief and support to Small & Medium-sized Enterprises (SME)1 and large companies alike in their business ventures so to stimulate individual organisational growth and prosperity, whilst also contributing to overall marketplace and industry innovation. Although the size of an organisation does have practical implications on which research & development tax credits are available, the parameters are wide and accessible enough as to benefit a multitude of business sectors, meaning a large amount of companies fall within the scope of the scheme. In practice, the UK Government engineered the research & development tax relief scheme to be a variable and versatile relief for companies which invest in research & development. 1 https://www.gov.uk/guidance/corporation-tax-research-and-development-tax-relief-for-small-and-medium- sized-enterprises 1

2. Provided a company has proven expenditure on the research & development of goods, products, services, processes; a company may be eligible for such relief. Available as a Corporation Tax2 reduction and/or a cash payment, companies may apply for research & development tax credits to ease the financial burden often associated with innovation. Eligible Work for Research & Development Tax Credits To qualify for research & development tax relief, your company must: •Be classified as Limited (Ltd) company3 which is subject to Corporation Tax4 •Carried out work on projects that count under the definition of research & development5 •Demonstrate proof that money has been allocated to research & development under the prescribed definition Is Your Industry Sector Covered, and, Which Costs Qualify? The UK Government created the research & development tax relief schemes to be as accessible as possible and to cover all industry sectors. The practical ‘catch-all’ approach to the legislation means that research & development tax credits are accessible to a huge collective of industries – from dry-cleaning to aeronautical engineering – so long as you can provide verifiable proof that your company has taken on financial risk in seeking to innovate your industry (not limited to your business). The scope of research & development tax credits covers the following costs6 which can be attributed to research & development: •Employee costs: including wages, salaries, pension funds and Class 1 National Insurance Contributions •Administrative costs for support staff directly supporting the project (and 65% of payments to external agencies) •Subcontractors for research & development activities (65% of relevant costs) •Software licenses (with limitations) •Consumables – inclusive of raw materials and utilities (heating, lighting, internet connectivity etc.) •Payments to clinical test volunteers (most commonly within the pharmaceutical industry) It must be noted that there are also several costs which are excluded, and therefore cannot be included within a claim for research & development tax relief: •Capital expenditure 2 https://www.gov.uk/corporation-tax 3 https://www.gov.uk/limited-company-formation 4 See n2 5 https://www.gov.uk/guidance/corporation-tax-research-and-development-rd-relief 6 https://www.gov.uk/guidance/corporation-tax-research-and-development-tax-relief-for-small-and-medium- sized-enterprises#costs-you-can-claim 2

3. •Cost of land •Rent or rates •Cost of patents and/or trademarks •Production and distribution of goods & services Practicalities of Research & Development Tax Credits The rules on which research & development tax relief scheme is applicable is dependent on the size of your company. SME7 As an SME, you will have less than 500 members of staff and either a turnover of no more than €100million OR no more than €86million in gross assets. SMEs may claim up to a maximum of 33p for every £1 that is spent on applicable research & development. However, the amount repayable to the SME via the Research & Development tax credit scheme is dependent on whether the SME is profitable: •(Loss making) SME – Up to 33p for every £1 spent on R&D •(Profit Making) SME – Up 25p for every £1 spent on R&D Large Companies Defined as a company employing 500 or more staff AND either a turnover of €100million or gross assets valued at more than €86million. Large companies cannot utilise the SME Research & Development tax credits. Instead, they must make use of Research & Development Expenditure Credit(RDEC)8, allowing companies to claim up to 11p for every £1 of expenditure on R&D activities. RDEC for SME Should an SME be subcontracted by a large company to perform R&D work, or that SME is in receipt of a grant/subsidy for an R&D project, they may often be restricted from making a claim via an SME research & development schemes, but instead will be able to make a claim via RDEC. Allow Areande to Assist – Call Today On average, an SME which claims research and development tax relief saves approximately £50K per year. 7 See n1 3

4. At Areande, our objective is to provide the most comprehensive solutions to tax relief services so that you can focus on what you do best. Call today and allow our experts to take care of your tax relief needs. Source:- https://uberant.com/article/916252-areande-you-and-research-development-tax- relief-enable-your-innovation/ 4