From 1st April 2015, the Government has made this scheme even more generous for small and medium sized business (SME).
The scheme only applies to organisations that are liable to UK Corporation Tax (so it excludes sole Traders and Partnerships) who are taking a risk by innovating, improving or developing a process or product or service.
If approved under the scheme, a profitable SME, the R&D claim could reduce its profit chargeable to corporation tax by up to 230% of the actual qualifying cost incurred. This can be a sizeable amount of corporation tax saved or could even create a loss for corporation tax purposes. The SME could then opt to carry back the loss to a previous accounting period and get a Tax refund (if corporation tax has been payable for that year) and/or carry forward the loss to offset against future profits.
Alternatively if the SME is loss making, the R&D tax credit can be surrendered to HMRC in return for a cash payment from HMRC of up to 33.35% of the eligible R&D expenditure.
The relief may be reduced for any grants or subsidies received by the company relating to the R&D project or if the R&D work subcontracted to the SME or the SME itself sub contracts the work out.
Normally if a company reimburses employees for business expenses, this would have to be reported to HMRC even though no tax may be due.
To avoid having to prepare and submit form P11D, the employer can seek dispensation from HMRC for expenses such as
- Travel, subsistence associated with the travel
- Fuel for company cars where the amount paid to employee does not exceed the Advisory Fuel Rates
- Hire car costs
- Fees and subscription
For most businesses the above expenses represent the vast majority of expenses reimbursed to employees and obtaining a dispensation would be beneficial in both time and cost.