For my fellow professionals who work with businesses to support them with claims for Research and Development Tax Relief, one of our common mantras when explaining to manufacturing businesses, engineering firms and software developers that they may very well be eligible to make a claim, is that the tax relief ‘isn’t just for those companies employing people in white coats.’
Even though it is the companies in the BioScience community that we are referring to in that statement, the irony is, that the same applies to your business as well. The costs that we will be able to claim for aren’t just your scientists or your doctors, there are a vast array of people within your company who will be eligible for inclusion in the claim. Even the person who cleans the clean room can be included in a claim.
There are a variety of costs that can be included in a claim, but there are also some surprising costs that can’t be included, we’ll come on to the latter in the next article.
With R&D Tax Relief size matters
To qualify as a Small or Medium sized Entity (if you are part of a group it relates to the size of your group and if you have VC investment there are complicated rules about linked and partner enterprises which might make you part of a larger group of businesses without the level of co-ordination a group may bring) and to claim under the more rewarding SME scheme then your group must employ less than 500 Full-time Equivalent staff, and have either a turnover of less than €100m or a balance sheet less than €86m then you can claim for the following costs
Staff costs – Wages and Salaries, bonuses, Employers NI, Employers Pension Contributions, Reimbursed staff expenses linked to R&D activity and Employee Share option costs.
Externally Provided Workers – individuals working for you through an agency
Subcontractor costs – payments to third parties for Research and Development activity
Consumable Material costs – if you are developing a prototype you will often have to use materials to develop it. If you can’t reuse these materials after they have been incorporated into the prototype and you don’t sell the prototype, then the materials will have been consumed and can be included in the claim.
Utility costs – You can include a proportion of light, heat and water in the R&D claim, provided that some of the R&D has been performed in-house.
Software costs – If you have to use specialist software in your research or you are using project management software to manage the R&D team, then you can include a portion of the software costs.
I’m not small! What’s the alternative?
If you don’t meet the criteria for the SME Scheme then you are eligible to claim under RDEC, the eligible costs are the same as above but you won’t be able to claim for the subcontractor costs.
When the top company in a subcontract arrangement is a large company it is the low man on the totem poll i.e. the person that is actually doing the work that can claim for the costs under the RDEC Scheme.
So for Clinical Research Organisations there is a constant requirement to claim under the RDEC scheme for all of their qualifying projects (unless they are developing IT Systems internally), but to identify a qualifying project there is a need to identify who the ultimate customer is, if the ultimate customer is a large or indeed foreign (outside the UK) entity or a non-corporate entity not chargeable to UK Corporation Tax then the CRO will be able to claim for their qualifying projects.
One of the interesting things to consider as a CRO is that if you don’t have coverage in a particular country and you need to work with a partner CRO, you may wish to consider whether you are using them as a subcontractor or as an agency, if you are working with a particular Clinical Research Associate to perform tasks in country then they maybe an externally provided worker.
As with many things the devil is in the detail, if you want to have a free no obligation chat with an expert to see whether it’s worth claiming please give Simon Bulteel a call on 01424 225345, or visit our website