Did you know that your UK entity could get cash payments for research and development (R&D) activities undertaken outside the UK?
The British Prime Minister, Theresa May, has promised to increase investment on innovation, reaching GBP 2 billion by 2020, via different grants and reliefs. One of the most successful and sought after grants is the R&D tax relief/credits.
However there is no restriction for the innovation to be undertaken in the UK.
The UK R&D tax relief is internationally competitive and very generous; allowing for activities occurring outside of the UK to be considered for the relief. Provided you have revenue expenditure incurred in or recharged to a UK subsidiary or permanent establishment (for example, an entity which is within charge to UK corporation tax), you are eligible to make a claim for R&D tax relief. The UK R&D tax relief has been in existence for over 15 years and it offers considerable reductions in UK corporation tax and/or cash payments for qualifying R&D activities, even when the business in the UK does not pay any tax.
The two main reliefs available are R&D Tax Credit (RDTC) which is mainly for small and medium-sized enterprises and R&D Expenditure Credit (RDEC) for large companies.
Under the RDTC rules, a company may get from HMRC up to GBP 0.33 for every GBP 1.00 spent on R&D qualifying activities. For large companies, you may offset approximately 11% (before tax) of the qualifying R&D expenditure against the costs in the accounts, creating a cost reduction and/or receiving a cash payment.
Qualifying R&D expenditure may include personnel costs, contractors payments, wages for staff provided by recruitment agencies, materials used up for R&D and software licenses costs. All of which relate to a qualifying R&D project, and the cost recharged to the UK, would attract a R&D incentive.
If you would like further information, please get in touch with Eyad Hamouieh
who would be happy to answer any questions you may have.