R&D tax credits are an incentive in the form of tax relief for companies of all sizes to raise their investment in R&D. The tax credits work by allowing companies to deduct qualifying expenditure on R&D activities when calculating their profit for tax purposes. Alternatively, some companies with under 500 employees can claim cash back.
The Government intends to introduce an ‘above the line’ R&D tax credit, effective from April 2013, and will consult on details at Budget 2012. Under this change the R&D tax credit could be accounted for as a reduction in R&D spend – rather than just being reflected in the tax line of the company accounts. Any unused credit (i.e. if the company is loss making) would be payable to the company (rather than carried forward in losses to be offset once the company is profitable).
For the purposes of R&D tax credits, R&D can be defined as any project to resolve scientific or technological uncertainty aimed at achieving an advance in science or technology. Advances include new or improved products, processes and services.
For more information, please get in touch.
