- Click Here To Know More About:
- Dianne Phuong Nguyen
Submitted by: Steve. A Shaw
In 2011, many workers in UK were startled by the sweeping changes in their research and development or R&D tax credits system as announced by the chancellor. The changes were overwhelming in that it offered more encouragement to businessmen to invest in a research and product design company.
Essentially, the amends in the R&D tax credits increased the tax break of any company dedicated to research and development. This means that such enterprises are given the privilege to claim up to 200% relief from the usual corporation tax they pay for projects. Simply put, the companies no longer need to pay the tax from the cost of their programs. Rather, they would be given an extra 100% discount on corporation tax discount.
Additionally, the R&D tax credits that caused companies to lose significant funds are given payable credits that can reach as much as 24% of the total cost of the project. This program is offered by the government of UK to encourage major boost among starting corporations.
Undoubtedly, this system is enticing for many entrepreneurs. However, one cannot simply plunge in making investments for a ground-breaking research. It is imperative to get as much information as possible. It is, after all, pointless to spend thousands of pounds on R&D projects that do not bear qualifications for the government’s relief.
What is R&D tax credit system?
Research and development is defined as the quest to contribute an innovative product, services, and procedures. It is also referred to as providing of input that can enhance the understanding and knowledge of the general public. As such, the R&D tax credits can only be enjoyed by companies who can present the relevance of their project and tout the benefits that come with it.
The government of UK also requires the companies to provide evidences that their research is associated to what the company does. For example, manufacturers of cleaning products should stick to innovating new home hygiene formulas for them to enjoy R&D tax credits. If they commit the mistake of introducing kitchen tools, they are less likely to earn the favour of the government on their R&D application.
Can all companies apply for R&D tax credits?
Unfortunately, no. It is important to note that the industries that qualify for the privilege is limited. The credits are primarily rewarded to companies who are valid contributors and affiliated to the science and technology sector. These would include manufacturing companies, gadget corporations and engineering firms. Businesses pegged on social services don’t usually enjoy the relief.
Another qualification is focused on the originality of the research. The project should veer away from duplication, with the findings obtained from a scientific process. Random discoveries or those from trial and error will not be credited by the government.
How can companies apply for R&D tax credits?
The rule mandates all companies to include their claims for relief in their tax returns. Small-scale corporations are recommended to place a tick in box 99 in the form of application that points to the size of the company. Write the total expenditure of the business in the box 101 – this reflects that total cost of money spent on an R&D project.
Usually, the claim can be made within two years after the accounting period of the corporation tax ended. This should be written in the profit and loss box of the form.
About the Author: For more information on tax credits, visit
R&D Tax Credits
. For more articles by Steve Shaw and permission to reproduce these articles on your own website, visit:
Free Articles
.
Source:
isnare.com
Permanent Link:
isnare.com/?aid=1623149&ca=Finances