Blick Rothenberg

R&D tax credits

12.01.2015

The UK tax authorities have announced that claims for R&D tax credits increased by 26% in the 2013 tax year, with 15,930 companies claiming £1.4bn of relief.

The UK tax authorities have announced that claims for R&D tax credits increased by 26% in the 2013 tax year, with 15,930 companies claiming £1.4bn of relief.

The relief is available to UK companies that undertake scientific or technological R&D.

UK companies that undertake R&D on behalf of an overseas group company can claim UK tax relief of around 8% of the staff costs and certain other expenditure related to R&D.

Due to changes to the rules in 2013, where a US parent has completed a ‘check-the-box’ election in respect of its R&D subsidiary (so that, for US tax purposes, the UK subsidiary profits are also subject to US tax), the decrease in UK tax payable no longer creates a corresponding increase in the US tax liability. This has made the benefits of a claim much greater to US multinational groups.

For small or medium-sized companies that own the IP arising from their R&D work, a different set of rules applies. In these cases, R&D relief can potentially subsidise almost one-third of the company’s qualifying R&D expenditure.