Research and Development (R&D) plays a pivotal role in driving innovation and maintaining a competitive edge for businesses. Governments worldwide, recognising the importance of innovation, offer tax incentives to encourage companies to invest in R&D activities. However, the rules and processes surrounding these incentives are continually evolving, and businesses must stay informed to maximise their benefits.
In his session, Tax Incentives for R&D and Innovation, Simon Briton gave a comprehensive look at how to maximise your R&D incentives and provided insight into what’s changing in the regulatory landscape.
The Value of R&D Tax Incentives
R&D tax relief schemes aim to reduce the cost of innovation by providing companies with cash savings or reductions in their tax liabilities. These incentives can be a game changer for start-ups and established companies alike.
Strategies to Maximise R&D Incentives
- Utilise Advanced Assurance
Advanced assurance from HMRC can significantly bolster investor confidence. This mechanism ensures that a company’s R&D activities qualify for tax relief, which increases the appeal of investing in the company. Moreover, combining advanced assurance with other schemes, like the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS), can offer income tax relief and a tax-free exit for investors if shares are held for at least three years.
- Align Year-End Dates
With the increasing importance of compliance, companies may need to adjust their fiscal year-end dates to benefit from newer R&D tax relief rates. For example, moving a year-end forward to March 31, 2024, could allow businesses to take advantage of favourable rules under the updated RDEC scheme.
- Ensure Timely Notification
Recent changes require businesses to notify HMRC of their intention to make an R&D claim within six months of their year-end. Missing this deadline can render a company ineligible to claim the relief, a pitfall that many businesses and advisors have unfortunately encountered.
- Leverage Patent Box Regime
If R&D activities result in a patentable product, companies can benefit from the Patent Box regime. This scheme offers a reduced corporation tax rate on profits derived from patented inventions, enhancing profitability
What’s Changing?
Recent changes in R&D tax relief schemes reflect a stronger focus on compliance and fraud prevention. Here are the key changes businesses must be aware of:
- Introduction of Additional Information Forms
To ensure the accuracy and validity of claims, businesses must now submit additional information forms. These forms detail the nature of R&D activities and must accompany the R&D tax relief claim. Failure to comply can lead to rejected claims.
- Enhanced Oversight
HMRC has significantly increased its scrutiny of R&D claims. This shift aims to minimise errors and combat fraudulent claims. Businesses must ensure meticulous documentation and compliance with all requirements.
- Stable Policy Environment
Despite recent reforms, the UK government has committed to maintaining the current R&D incentives for the next five years. This stability provides businesses with clarity and confidence when planning long-term R&D investments.
For the full session, please see here. Simon Briton covers the following topics during this course:
- How to identify R&D opportunities across industries and maximise claims for your clients.
- The difference between SME R&D tax relief and RDEC—and when to use each.
- How the Patent Box can create significant tax savings for IP-rich businesses.
- Unlocking growth for start-ups and SMEs through SEIS and EIS investor incentives.
- Strategies to combine multiple schemes for maximum benefit.
- Key compliance tips to avoid common pitfalls.
The contents of this article are meant as a guide only and are not a substitute for professional advice. The author/s accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article. The information at the time of publishing was accurate and could be subject to final changes.
