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R&D Tax Credits and Patent Box

Research and development tax credits are a generous company tax relief that can either reduce a company’s corporate tax liability or, provide a sizeable cash rebate. As such they 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 can receive taxable credit of 11% (12% after 1 January 2018) 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 its 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 patents and could lead to significant tax savings.

Maximising the opportunity to gain benefit from this regime is not going to be straightforward.  HM Revenue & Customs identifies a number of key issues that need to be considered:

  • Patent ownership requirements – it is expected that many companies will seek to secure patents on innovations where they perhaps previously may not have bothered.  This may lead to backlogs at the Patent Office.  The sooner the application is made the better.

  • Calculation of 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 calculation of the claim is particularly complex for companies simultaneously claiming R&D tax credits and early planning will be required if maximum tax advantages are to be achieved.  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.

Because of these complexities and the very real potential to gain benefit from Patent Box we are consulting 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

Below are the current processing times for R&D Tax Credit claims as issued by HMRC. These will be updated as and when new information is received.

R&D tax credit and RDEC claims received online are now being processed within 28 days of receipt into HMRC unless we have concerns about the claim and intend to ask for further information.

Before contacting HMRC for an update on the status of any R&D claim, please first check the company’s online account to determine whether the claim has been processed. Payments processed should be visible on the company’s online account within 24 hours, however they may be subject to a further security check.

Please note that any emails received before 30 September chasing the status of a R&D claim will not be responded to. We have now processed all R&D payments except those where we will be in contact to ask for further information.

If you need to speak to someone regarding an outstanding payment, please call the Corporation Tax Helpline on 0300 200 3410. If you have a query regarding the technical application of the R&D schemes you may email or call 03000 123 3440 and leave a voicemail detailing your query. Whichever option you choose someone will call you back to discuss your query.

For further information please get in touch with your usual James Cowper Kreston contact or click here to view the James Cowper Kreston R&D factsheet.