The UK's R&D Tax Relief scheme generates significant tax savings for innovative UK subsidiaries of US businesses. This article will explain how it works, who can benefit, and which projects qualify.
UK R&D Tax Relief is like R&D Tax Credits available to American companies. It is available to UK subsidiaries of American businesses. It can also apply to businesses with overseas private equity investment.
How can US Businesses benefit?
R&D Tax Credits are a tax relief available to eligible UK subsidiaries of US businesses (not just start-ups).
The relief is for businesses that investing in R&D and undertaking product, process, or software development.
It is worth between 10.53% and 33% of qualifying expenditure via Corporation Tax reductions, tax refunds, cash credits and the creation of additional tax losses. This is an unrivalled relief in the UK.
It is even possible to recover a proportion of an equity investment or acquisition value via tax refunds or credits, for R&D work undertaken by the UK business.
How can an American business benefit from the UK's R&D Tax Relief scheme?
Are you an American business or private equity organisation with operations or subsidiaries in the UK?
The UK R&D Tax Relief scheme offers superb benefits to American businesses and private equity investors.
Although R&D work may be carried out by a UK business, American businesses could benefit if they have links to a UK business that carries out qualifying R&D.
Even early-stage businesses can benefit via cash-back tax credits for their initial R&D work.
What kinds of project qualify?
- Software as a Service development
- New software for projects or new functionality that extends the baseline of the existing technology
- Development of new tools to extend the functionality of application software programs or operating systems
- Novel and new data management techniques, such as new data structures or object representations.
- Extensions to software and programming languages and tools
- Complex integrations of multiple programs
- New product development or appreciable improvements involving innovation to existing products, materials, or devices.
- Process development – making the process leaner and quicker.
Read more: What is R&D? Research and Development in Business
How to get started
It can be difficult to keep up with the latest tax planning opportunities that could benefit your UK subsidiaries.
Getting your claim right is crucial. You should always partner with a reputable expert in UK R&D tax relief, that holds memberships with Professional bodies.
As members of the Praxity Global Alliance, we can help all businesses – whatever their global structure – claim their full entitlement of UK R&D tax reliefs. Many companies do not realise they qualify.
Our team includes an ex-HMRC UK R&D Tax Relief inspector. We undertake most of the work in preparing a claim, ensuring compliance with the relevant guidance and legislation.
Darryl Hoy
Darryl is the Technical Director of the Radius team. He is a specialist in Research & Development tax reliefs, having previously worked at HMRC as an R&D Tax Inspector.
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