Tag Archives: tax relief

Research and Development (R&D) Relief

Your company can claim R&D Relief if they have an R&D project that seeks to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty, not just an advance in its own state of knowledge or capability.

The project must be related to your company’s trade – either an existing one, or one that you intend to start up based on the results of the R&D.

In order to see whether your company could qualify, please check the following guidelines:

Project – it must be a separately identifiable and commercially viable project.

Advance in science or technology – what scientific or technological advance is being sought? This focuses attention on the project’s aim for an advance.

Science - Scientific uncertainty exists when knowledge of whether something is scientifically possible or how to achieve it in practice, is not readily available or deducible by a competent professional working in the field.

Technology - Technological uncertainty exists when knowledge of whether something is technologically feasible, is not readily available or deducible by a competent professional working in the field.

Directly contribute – you’ll need to show that the persons leading the R&D project are themselves competent professionals working in the relevant field.

Scientific or technological uncertainty – Explain why they consider the uncertainties are scientific or technological uncertainties rather than routine uncertainties.

SME Relief

If a company has fewer than 500 employees and either of the following:

an annual turnover not exceeding €100 million
a balance sheet not exceeding €86 million

It qualifies as an SME for R&D Relief.

This means there are higher rates of relief. From 1 April 2012, the tax relief on allowable R&D costs is 225% – that is, for each £100 of qualifying costs, your company could have the income on which CT is paid reduced by an additional £125 on top of the £100 spent. It also includes a payable credit in some circumstances.

Larger Company Relief

Otherwise the large company’s relief is available on allowable R&D costs at 130% – that is, for each £100 of qualifying costs, your company could have the income on which CT is paid reduced by an additional £30 on top of the £100 spent. If instead there is an allowable trading loss for the period, this can be increased by 30% of the qualifying R&D costs – £30 for each £100 spent.

Seed Enterprise Investment Scheme

In the Finance Act 2012 the government introduced a new tax advantaged venture capital scheme called the Seed Enterprise Investment Scheme (SEIS).

Qualifying investments will attract income tax relief at 50% on the lower of £100,000 and the amount of the qualifying investments made during the tax year for investments made between 6 April 2012 and 6 April 2017.

There are qualifying conditions as follows:

The maximum that can be raised under this scheme is £150,000.
The investee company must have been incorporated no more than two years before the SEIS shares are issued.
The company must have fewer than 25 employees and assets up to £200,000.
The company must not have had any investment from a Venture Capital Trust (VCT), or issued any shares in respect of which it has submitted an EIS compliance statement
Within 3 years of the date of the relevant share issue, all the monies raised by that issue must be spent for the purposes of a qualifying business activity, carried on either by the issuing company or by a 90% subsidiary. If this condition is not met, investors will lose their tax relief.
The payment of dividends to shareholders is not regarded as being for the purposes of a qualifying business activity.
There are also provisions for the withdrawal of SEIS relief in certain circumstances, such as where the shares are sold within three years of issue.
A qualifying trade is one which is conducted on a commercial basis with a view to the realisation of profit.
Most trades qualify, but some do not. A trade does not qualify if it consists wholly, or substantially, of ‘excluded activities’. A separate list of ‘excluded activities’ are available.
Shares must be paid up in full, and in cash, when they are issued.
Shares must be full-risk ordinary shares, and may not be redeemable or carry preferential rights to the company’s assets in the event of a winding up.

Investors

You have subscribed for shares which have been issued to you and which at the time of issue were fully paid for. You may subscribe via a nominee.
You do not have a ‘substantial interest’ in the company, at any time from date of incorporation of the company to the third anniversary of the date of issue of the shares. ‘Substantial interest’ is defined as owning more than 30 per cent of the company’s issued share capital, or of its voting rights, or of the rights to its assets in a winding up. Shareholdings of associates are taken into account in arriving at the 30 per cent figure. ‘Associates’ include business partners, trustees of any settlement of which the investor is a settlor or beneficiary, and relatives. Relatives for this purpose are spouses and civil partners, parents and grandparents, children and grandchildren.
Brothers and sisters are not counted as associates for SEIS purposes.
It does not permit employees of the company to claim SEIS relief, but there is a specific exception for directors who are not considered employees and do not receive remuneration.

Childcare Vouchers – can you claim them?

The process of receiving and paying with childcare vouchers is designed to be simple and straightforward for both employers and employees.

Most employers who provide childcare vouchers do so through a salary sacrifice scheme. This means you agree to reduce your salary by a certain value, and receive childcare vouchers to the same value but pay no tax or National Insurance on these vouchers.

To join your employer’s childcare vouchers scheme you first of all need to complete a salary sacrifice agreement. Your employer will give you directions on how to do this.

After your agreement has been submitted to your employer, they will reduce your salary by the requested amount and arrange for vouchers to be provided to you.

Status	Annual Tax exempt amount*	Savings*
Basic rate (contracted out) 20% tax 10.6% NI	£2,916	£892
Basic rate (contracted in) 20% tax 12% NI	£2,916	£933
Higher rate category 40% tax 2% NI	£1,484	£623
Additional rate category 45% tax 2% NI	£1,325	£623

If you are found to fall into the higher rate category (as a rough guide this is likely to be those earning between £44,781 and £151,484) you will be able to get £124 a month tax and NI exempt (£28 a week).

An example for someone earning £20,000 per annum, £1,666.67 per month.

	Salary before scheme participation	Salary during scheme participation
Monthly Gross Salary	£1,666.67	£1,666.67
Childcare vouchers per monthGross salary sacrifice total		£243.00 £243.00
MONTHLY GROSS SALARY SACRIFICE		£243
Monthly Gross Salary after salary sacrifice Monthly NIC contribution (12%) Monthly income tax contribution (20%) Net Salary	£1,666.67 £120.48 £189.00 £1,357.19	£1,423.67 £91.20 £140.40 £1,192.07
MONTHLY NET SALARY REDUCTION	£1,357.19 minus £1,192.07 =	£165.12
MONTHLY SAVING	£243.00 minus £165.12 =	£77.88
ANNUAL SAVING	£77.88 x 12 =	£934.56

If you want advice on claiming childcare vouchers and what may be best for you, please get in touch.