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08 August 2019

Could your business benefit from R&D tax relief?

More businesses than ever are seeking to adapt operations and business models as they prepare to cope with technological developments, competitive pressures and the changes that Brexit will bring. For many, innovation will be part of the solution. Yet official statistics show that fewer NI businesses avail of R&D tax credits than businesses elsewhere in the UK while in RoI there is low take up of R&D tax credits among SMEs.

FPM experience is that the main reasons for this low take up are lack of awareness of the R&D regime and a misconception that R&D relief only applies to scientists.

NI companies

For NI businesses, there are two R&D schemes — one for SMEs and one for large companies.

SME R&D relief allows companies to deduct an extra 130 percent of qualifying costs from their yearly profit. Taken with the normal 100 percent deduction, this makes a total 230 percent deduction. Loss making companies can claim a tax credit worth up to 14.5 percent of the surrenderable loss.

Large companies can claim a Research and Development Expenditure Credit (RDEC) for working on R&D projects.

To qualify for these R&D incentives, you must be carrying out research and development work in the field of science or technology. This includes:

• overcoming difficult technological problems by creating new processes, products or services,
• making appreciable improvements to existing processes, products or services, or even
• using science and technology to duplicate existing processes, products and services in a new way.

Software development, engineering design, new construction techniques, bio-energy, clean-tech, agri-food and life and health sciences may also qualify.

RoI Companies

In the Republic of Ireland, companies carrying out research and development activities in Ireland or the European Economic Area (EEA) may qualify for an R&D tax credit if the expenditure does not qualify for a tax deduction in another country. The credit is calculated at 25 percent of qualifying expenditure and is used to reduce a company’s corporation tax.

Enterprise Ireland also recently introduced an Agile Innovation Fund which allows companies to access up to 50 percent in support of innovation projects with a total cost of up to €300,000. This fund has a streamlined application process and fast track approval.

Read more below

Many businesses miss out on potential tax savings through lack of understanding of R&D tax relief, says Feargal McCormack.

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Could you qualify?

When businesses review their operations to see what activities they are doing that could fall within the scope of R&D, the results are often surprising. However, the claims process can be difficult to navigate, particularly for smaller businesses. To make a successful claim, it is vital that the correct procedures are followed and all required documentation is in place. While most businesses need professional assistance to quantify their claim and organise the necessary documentation, FPM experience is that those adapting and restructuring operations as they prepare for Brexit stand to gain significant tax benefits by improving their understanding of the available R&D incentives. In the current climate, it makes sense to talk to advisors with cross-border expertise as you may need to form strategic alliances to overcome Brexit-related difficulties. Contact us to find out more about how we can help.

Contact Feargal

Feargal McCormack / Managing Director

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