Research and Development - A Changing Environment
Businesses trading through limited companies can benefit from extra tax relief on expenditure through R & D tax credits. It is not available for partnerships or sole traders. To claim you must show that you are advancing science and technology or trying to overcome a technical uncertainty that could not easily be worked out by professionals. Where farming businesses are run though a limited company you may be able to claim for some of the new processes and investigations that you are doing as part of running an innovative and progressive business and it is certainly worth considering. Most claims are done by professional firms specialising in R & D claims as it is highly specialist.
The relief for small and medium sized companies given is changing from the 1st April 2023
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Rate of relief up to 1st April 2023 |
Rate of relief after 1st April 2023 |
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If the relief claimed against your annual profits |
130% of qualifying costs plus normal 100% deduction |
86% of qualifying costs plus normal 100% deduction |
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If you are loss making and claim a tax credit |
14.5% of qualifying costs |
10% of qualifying costs |
For planning and budgeting be aware of the reduced levels of relief from April if you are claiming.
HM Revenue and Customs are increasing their auditing on schemes as there has been abuse of the scheme. If you are making a claim make sure that you are happy that what you are claiming on falls within the criteria of the scheme and that the expenditure being claimed relates to the scheme. This is especially important if a someone else is making your claim for you as there are penalties for incorrect claims.
Margaret Scarrott FCCA BIAC
Partner
Margaret has been in practice in the South West for over 20 years after qualifying as a Certified Chartered Accountant in London. Margaret is frequently called upon to help with partnership capital tax planning and family business reorganisations.
Margaret is a member of the British Institute of Agricultural Consultants and has been a member of the CLA National Taxation Committee, the Somerset CLA Committee, Cannington College Corporation and the Bath & West Conference Committee in the past. Margaret farms with her husband on the Somerset and Devon border. She is a keen supporter of Young Farmers and is a club leader and is on the advisory of Honiton YFC. Entertaining family and friends takes up much of Margaret’s spare time.