Helping asset managers identify qualifying R&D expenditure and capturing it in a structured manner compliant with HMRC requirements.
R&D tax reliefs support companies that work on innovative projects in science and technology. It can be claimed by companies that seek to research or develop an advance in their field and can even be claimed on unsuccessful projects. Asset managers who develop bespoke software to assist them with investment management activities / develop quantitative trading models, may be able to claim corporation tax relief in the corporate entity in their structure if their project meets the definition of R&D per HMRC.
The work that qualifies for R&D relief must be part of a specific project to make an advance in science or technology and must relate to the corporate entity’s trade (either an existing one or an intended start up based on the results of the R&D). The project may research or develop a new process, product or service or improve on an existing one. Where asset managers look to develop new investment software and technology to support their investment management function, R&D relief can be applied for.
To get R&D relief, the following needs to be explained with regard to a project:
- how it looked for an advance in science and technology;
- how it had to / tried to overcome uncertainty; and
- how it could not be easily worked out by a professional in the field.
There are different types of R&D relief available in the UK, depending on the size of the company and if the project has been subcontracted or not.
Small and medium sized enterprises (SME) R&D relief allows companies to:
- deduct an extra 130% of their qualifying costs from their yearly profit, as well as the usual 100% deduction, to make a total 230% deduction;
- claim a tax credit if the company is loss making, worth up to 14.5% of the surrenderable loss.
Large companies can claim a R&D expenditure credit (RDEC) for working on R&D projects. It can also be claimed by SMEs and large companies who have been subcontracted to do R&D work by a large company. The RDEC is a tax credit that was increased to 13% from 1 April 2020.
How we can help:
We can help with preparation of the required R&D claims and supporting analysis to be submitted to HMRC along with the information required to be included in the corporation tax return. This would include:
- Interviews with technical staff to discuss the R&D activities;
- Analysis of the work undertaken splitting it into projects as required under the R&D tax legislation;
- Review of the eligibility of project work and costs incurred;
- Development of a R&D claim for each relevant period; and
- Liaising with accountants undertaking the tax compliance to ensure the claim is submitted.