A Final Word on R & D Colin Smyth

2 Latest Government consultation on R&D tax schemes (June 2011) “Above the line” tax credits Refundable credits for loss making “Large” companies Offset against any tax liability Relaxation of rules for sub-contracted R&D (large regime) “routine” R&D activities qualify Contractor to notify qualifying status of the larger project New financial health test for “companies in difficulty” More subjective but automatic exemptions First three years of R&D activities Where company is able to raise sufficient equity from existing shareholders or the market place to fund need

3 Latest Government consultation on R&D tax schemes (June 2011) No changes to categories of qualifying costs Some costs still excluded (rent, patent fees, transport, equipment hire, capital) Costs of indirect qualifying activities to be excluded No changes to be made to the Government’s R&D guidelines No statutory definition for production Unclear boundary line (experimental vs. commercial) Cost of building prototypes must be “solely for R&D” New guidance on the principle of “uncertainty” Piloting a pre-submission clearance process Formalising an existing facility Provide earlier assurance Relied upon for more than one period

4 Making effective claims for R&D tax relief Claims made in the company tax return The level of information provided should be proportionate to the size of the claim. For bigger claims – provide details of : History of business R&D size status R&D projects undertaken outlining technological uncertainties and how company sought to resolve them Time-line of project Summary of qualifying costs and qualifications held by the R&D team Details of any technical awards or patents registered of the IP created HMRC more likely to accept claim without challenge or only raise a small number of queries

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