Enhanced Research & Development Tax Relief

Doing business in the modern world is as competitive as it has ever been and to succeed, a business must constantly review its costs.

A substantial cost for any successful enterprise is taxation and for those that carry out ‘qualifying’ research and development (R&D) activities, a great opportunity exists to drastically reduce tax liabilities through application of the tax rules relating to ‘enhanced research and development tax relief’.

Advising on claiming relief under the R&D provisions is an area in which Vista Partners LLP has notable expertise and success. 

One of our more recent cases saw us advise a UK subsidiary of a larger international group on their R&D strategy.  By combining the reliefs due under R&D with other aspects of their tax policy, we were able to reduce this successful business’s taxable profits to zero.

For ‘small or medium-sized enterprises’ (SMEs) the basic relief allows a deduction against taxable profits based on 175 per cent of the actual expenditure incurred (150 per cent for expenditure incurred before 1 August 2008). There are related provisions for SMEs that do not trade in a period but carry out qualifying R&D.

SMEs with unrelieved losses derived from R&D tax relief may in fact claim a tax credit equal to the lesser of

(a) 14 per cent of the unrelieved (or ‘surrenderable’) loss (16 per cent for expenditure incurred before 1 August 2008); and
(b) the total of the company’s PAYE and NIC liabilities for the accounting period

There is also a scheme for ‘large’ companies which broadly follows similar lines to the SME scheme but is generally less generous in tax terms.

We would be delighted to hear from you with regard to assisting in this area and should you wish to speak to us, please call either Gary Proudlock or Charles Owen.