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R&D Tax Credits and Patent Box

R&D tax relief

Research and development tax relief is a generous incentive and can either reduce a company’s corporate tax liability or, provide a sizeable cash rebate. As such it can represent an alternative, and often vital source of funding.

For small and medium sized companies with profits there is a “super” tax deduction. An SME spending £100,000 on eligible R&D could save tax of up to £24,700. Where the extra deduction creates or increases a tax loss it may be possible to surrender the loss and receive a cash repayment instead; equating to up to £3,335 for every £10,000.

The regime for larger companies is less generous, but nevertheless very worthwhile. Large companies (or members of large groups) can receive taxable credit of 13% of qualifying expenditure under the R&D Expenditure Credit “RDEC” scheme.

To be able to qualify a company needs to be undertaking qualifying R&D; but it is not just about white coats and test tubes. We submit claims across a diverse range of sectors including manufacturing, electronics and engineering, computer software, biosciences, medical devices and food.

HM Revenue & Customs is eager for companies who conduct qualifying R&D to claim and has specialist "Incentives and Reliefs" teams who handle R&D claims. The James Cowper Kreston tax team  keep in regular contact with the specialist teams. This, coupled with our experience and knowledge of the tax law, ensures our clients are getting clear and up-to-date advice.

We could do the same for you. In the recent past James Cowper Kreston has claimed R&D tax credits on over £150 million of our clients’ expenditure. We know how to help.

Patent box

The patent box regime offers a 10% corporation tax rate on profits generated from UK and/or European patents and could lead to significant tax savings.

Maximising the opportunity to gain benefit from this regime requires some careful consideration including:

  • Patent ownership requirements – the reduced tax rates may encourage some companies to patent when previously they hadn’t. They need to factor in the time it takes to file a patent application and the time delays before grant of the patent.
  • Calculation of the claim – there is a structured approach to the calculation of the claim and this will mean that it is important that companies identify streams of income that arise from their patents.

The claim also links R&D expenditure with creation of the patent and the patented invention. For companies in both UK and International groups, it may be necessary to consider how IP is held and managed within the group to ensure tax savings are achieved. There are complexities and pitfalls to be avoided.

Because of these complexities and the very real potential to gain benefit from patent box we like to consult with clients at an early stage to define appropriate strategies to ensure that they are making the most of the regime.

For more information on patent box, please click here.

For more information on R&D, please click here.

HMRC latest R&D processing times

Autumn 2020

We are pleased to report that HMRC are processing the majority of  R&D Expenditure Credits and SME R&D claims in 28 days post receipt. To enable a smooth process follow these simple steps:

  • Make sure you include your bank details in your tax return for a repayment
  • Provide details of your qualifying R&D projects
  • Give workings as to the make up of your claim.

If you would like assistance with any aspect of R&D tax credits then please contact RD@jamescowper.co.uk