There are currently two very generous tax breaks for companies involved in research and development (R&D), particularly those that go on to patent their products or inventions. Many such companies may not be claiming all the relief that they are entitled to.
Firstly, R&D tax credit relief provides companies with an enhanced corporation tax deduction of up to 225% for qualifying R&D expenditure. For example, £100,000 qualifying expenditure attracts a tax deduction of £225,000. Qualifying expenditure would include scientists’ and engineers’ salaries involved on the research project.
Many companies involved in R&D are making a loss in the early stages and rather than carry the loss attributable to the enhanced R&D spend forward they are able to claim a repayment from HMRC. The repayment was increased to 14.5% from 1 April 2014, turning the £225,000 loss into a £32,625 refund (32.625% of the qualifying spend).
