News
December 2008
Research & Development Expenditure
Qualifying revenue expenditure, known as research and development expenditure (R&D)attracts a corporate tax deduction of 175% (150% up to 1/4/2008) for enterprises who are classified as small and medium sized enterprises (SME).
If the company is not yet trading then the amount being claimed can be treated as a trading loss. Alternatively, where the company has a loss for the relevant period, it may instead claim an R&D tax credit (cash payment) equal to the lesser of:
* 14% (16% up to 1/4/2008) of the loss and
* the company’s PAYE & NIC liability for the year in question.
SME’s are define as enterprises with a maximum turnover of €100m, net assets of €86m and 500 employees at a date still to be determined by the Treasury. Up to that date the limits are turnover of €50m, net assets of €43m and 250 employees. The enterprise has to comprise all the companies forming a Group.
A limit of €7.5m has been imposed upon this relief from a date to be determined by the Treasury.
Qualifying revenue expenditure comprises, staff cost, externally provided workers costs, software and consumable items and sub contracted research and development costs. There is a de minimus amount of £10,000 that has to be incurred or expenditure to qualify for R&D tax relief. R&D expenditure which qualifies for relief must comprise expenditure incurred in the development of scientific or technological knowledge that isn’t commonly available or creating or improving a product, process or service.
Large enterprises are enterprises which are too large to be classified as SME’s, and are entitled to the same relief but at the reduced rate of 130% (125% up to 1/4/2008).
Where capital expenditure is incurred in R&D projects these are eligible for Research and Development Allowances (RDA) of 100% on qualifying equipment and buildings (excluding land).
