My PhD research was in computer science and complexity science, although I also published in web-technologies (and even paleontology!) I have founded, run and sold a high-tech business based on my research and written two technical text-books published by Elsevier.
Mini Bio
The R&D Tax Credit
The Bottom Line
If you are a company with annual profits over £70,000, you should commission me to conduct a research and development program for you. Current tax law means the government will subsidise the project to more than 100% of its costs.
How is this Done?
High technology companies operate in a global market of ideas: intellectual property is a key driver for sustainable business value. But creating new intellectual property can be difficult, costly and distracting.
Government Links
Recognising the challenges of UK businesses in the knowledge economy, the government introduced the Research and Development Tax Credit in 1999. This allows companies of any size that spend over £10,000 on research and development to claim back more than they spend as a relief on their coporation tax. Small and medium sized companies (up to 500 employees) can claim a staggering 150% of their qualifying expenditure, while larger companies can claim 125% (The 2007 budget announced a further increase, to 175% for SMEs and 130% for large companies).
Companies can either carry over any unused credit, or they can cash it in at a 24% rate. So if you are an early stage company on your way to profit, you can get 24% of your R&D expenditure back in cash, or choose to keep 150% in hand to offset tax in the following year.
A Simple Example
A small web-design consultancy makes a profit of £100,000 per year. Their tax bill for 2007 is £19,000, and the remaining £81,000 is paid to the directors as dividend remuneration.
I take on a research and development project to build new technology that automates part of their design process. The project takes 15 days, and costs £13,500. It qualifies for R&D tax credit because the expenditure is over £10,000 and the scope of the project is genuine R&D.
The company gets just over £20,000 in tax credits, removing their entire tax liability for 2007 and carrying over nearly £4,000 to the following year. The directors are able to pay themselves a further £9000 over two years.
What's more, the company now has a unique and valuable technology that allows them to lower their costs, take on more work, and increase their profit. In addition, their new IP significantly increases the company's value, making it easier to attract investment, or to position for acquisition.
Beware Cowboys
Like any legislation, there are some people who try to abuse the R&D tax credit. You may find websites and advisers who suggest you misrepresent normal business activities as research and development in order to claim the tax relief. HMRC are increasingly wising up to these scams. There are now specialist teams with the skills to assess R&D claims and check whether they relate to genuine R&D activities.
What I do is exactly what the government is trying to encourage: genuinely new innovation that provides sustainable and defensible value to my clients, helping them to compete in the knowledge economy (and helping them to bring more money back into UK Plc.) Nobody I've worked for has ever had a claim on one of my R&D projects rejected, simply because they are exactly what the tax credit was designed for.
Next Steps
Those Links Again
Get in touch today for a free consultation on how I can save you thousands (or even tens or hundreds of thousands) of pounds in tax, while building your balance sheet value with new intellectual property.