Are claiming your R&D tax relief?
The Research and Development (R&D) tax credit was introduced in 2000 and is a generous tax relief supported by HMRC as a way of rewarding UK businesses for undergoing innovative development in their company. In October last year HMRC released their updated R&D statistics which showed a clear image of the industries that are claiming R&D credits. From these statistics it is evident that the printing industry is significantly under claiming compared to other industries and we think the two reasons for this are:
1) That most businesses don’t believe that they qualify for the relief and;
2) Some believe that the claiming process is too complex.
However, in reality a lot of print activities can be classed as R&D and they don’t necessarily involve the stereotypical ‘white lab coat’ to be classed as this.
Once you have ascertained which projects qualify for the tax relief, the next step is to quantify the costs that can be included in the claim. HMRC have specific cost categories as to what costs can be included in the claim:
- Staff costs (including Salaries, Employer’s NIC & Pension Contributions)
- Subcontractor costs (Restricted to 65% for unconnected sub-contractors)
- Externally provided workers (Restricted to 65%)
- Software license costs
- Cost of consumable items (Items consumed, transformed or destroyed in the R&D process)
Different rates of tax relief
There are two different rates of tax relief, one aimed at SME’s and the other aimed at large companies. The tax saving for SME businesses equates to around 25p for every £1 spent on R&D. It is a complex calculation an SME receives an additional 130% super deduction which is applied to the above cost categories that relate to R&D activities. This is effectively an additional deduction in calculating a company’s taxable profits (hence reducing the corporation tax bill). If the R&D relief creates a loss for the business, then the losses that are created can be swapped for a refund of 14.5% of the losses that arose. The tax saving for large companies is slightly different; large companies are paid a 12% taxable tax credit based on their qualifying R&D expenditure.
As part of our Partnership with the BPIF we have saved UK print companies almost £1 million in R&D tax relief.
Within the printing industry technology is progressing at a phenomenal rate. This progression frequently constitutes R&D for tax purposes and examples of qualifying R&D in the printing industry include:
As print companies develop their software this can often result in an advance in computer software technology. For example, combining your pre existing technology with an off the shelf technology can often be extremely complex.
Experimentation with different substrates and inks
Experimentation with the methods of printing is a good example of R&D in the printing industry, this experimentation with different substrates and inks enables businesses to offer unique and innovative new products for their customers. The science behind this can often mean companies have to undertake huge amounts of trial and error.
Developing and adapting new print machinery
Due to the technology within the printing industry progressing at a fast rate it is important for businesses in this sector to continuously find ways of improving their production methods. This could be purchasing a new piece of equipment and developing it to fit into the production process or it could be making significant improvements to older equipment and ensuring they perform better than they had before.
Research and Development tax reliefs are still a complex area, so we recommend you seek advice from a tax professional. Contact Steven Holmes from Garbutt + Elliott with any questions raised from this article – firstname.lastname@example.org. The BPIF are connected to specialists who give discounts when assisting with a BPIF members R&D relief claim so get in contact to discuss this generous tax relief.