Have you got a great idea and are trying to figure out how to fund it? One option that is worth exploring is HMRC's Corporation Tax: Research and Development Relief. It is worth considering if you:
- currently pay Corporation Tax
- the idea would make an "appreciable improvement" to an existing process or product
- or it is a new idea based on a scientific or technological advance
An example of this could include moving from a highly paper based system to a bespoke application that facilitates your process and increases communication, quality and productivity. We have succesfully claimed for this ourselves and recommend that, for any bespoke software development, it is worth a phone call to see if it meets the criteria.
If your idea meets HMRC's guidelines and you pay Corporation tax you need to:
- list all associated internal activites i.e. internal staff costs, use of materials, utilities etc
- list costs associated with external activities i.e. subcontractors, purchased items
- review items with your accountant
For the Small and Medium-sized Enterpise Scheme tax relief on allowable R&D costs is 225%. This means that for every £100 of qualifying costs spent you can deduct £125 from profit and thus reduce your Corporation Tax.
You can read more at https://www.gov.uk/corporation-tax-research-and-development-rd-relief and should definitely work with your accountant.
If you want to discuss a new project idea please don't hesitate to contact Adam Kuznesof on 0191 482 0444.
