Earlier this month, Nicola Sturgeon announced that oil and gas innovation spend had almost trebled to £43m in Scotland last year. The Scottish government has surpassed its commitment to provide £10m of support for innovative projects in the industry and has committed more funding over the next 10 years.
What you may not be aware of is that Research and Development (R&D) tax relief is also available to companies which are undertaking funded innovative projects and are within the UK tax net.
There are two different schemes: the more beneficial SME scheme (offering a 130% expenditure enhancement) and the Research and Development Expenditure Credit (RDEC) regime (an 11% tax credit).
However, despite the RDEC regime offering a lower level of relief, the benefit is that it is available for companies whose projects are being funded, unlike the SME scheme. This can be grant funding from bodies such as Scottish Enterprise or OGIC. Alternatively, the regime is open to those companies whose projects are funded by customers.
Therefore, a company may have a reduced financial risk when undertaking an R&D qualifying project and still receive a repayable tax credit. Under the RDEC scheme, for every £100 of qualifying R&D spend, the tax saving or repayable tax credit would be £8.91, resulting in an effective cost of £91.09.
To qualify for R&D tax relief a company must be trying to achieve an advance in science or technology through the resolution of scientific or technological uncertainty. Qualifying activities can include the development of new processes, products and services; appreciable improvements to existing products; process improvements and adaptation of existing products and services, amongst others.
How can AAB help?
- Establish whether your company qualifies for any of the reliefs;
- Provide advice on the requirements for supporting documentation and records;
- Work with you to prepare and submit claims to HM Revenue & Customs and deal with any subsequent enquiry.
If you require further information, please contact Moira Kelly, Senior Manager (firstname.lastname@example.org) or your usual AAB contact.