Monthly Archives: January 2019

Introducing Jon Connor: Our new R&D tax specialist

Research and Development (R&D) tax incentives have been around now for quite some time, but are you making the most of them? According to our newly appointed R&D Tax Credits Manager, Jon Connor, these benefits could give you “a competitive edge”.

Uncovering innovation from within a business can often be complex. It may be buried within different areas of your organisation or even outsourced. Whether you’re a recruitment agency designing a new app or a manufacturer developing new production techniques, innovation can come in all shapes and sizes, and is very rarely bound by industry.

However, around nine out of ten eligible SMEs fail to claim for R&D tax relief, indicating that the hidden value of innovation is not known.

“Companies are missing out on valuable R&D tax credits to the tune of thousands of pounds,” says Jon. “Generally speaking, I find it’s the businesses you typically wouldn’t associate with R&D that are overlooking relief.”

“The very term “R&D” often deters many firms from applying,” Jon explains. “Innovation doesn’t always take place in laboratories with scientists in white coats. On numerous occasions I’ve had business owners tell me “we don’t really do R&D”, often perceiving the scope of qualifying activities to be much narrower.”

If you are developing new products, processes or services there is a strong chance that you are eligible for R&D tax relief. The relief allows a company to deduct an extra 130% of qualifying costs from its yearly profit (as well as the normal 100% deduction) to create a total 230% deduction. Qualifying expenditure can include costs spent on employees, software, transformed / consumed materials and subcontractors.

Here at PM+M have helped clients all over the UK recoup over £3m in R&D tax credits in total. In turn, this has enabled business-owners to reinvest in innovation, future-proof their companies and, most importantly, invest in growth initiatives.

Jon says: “If you’re unsure as whether you could qualify for tax relief, it is absolutely worth having a ten-minute phone call with us. The potential outcomes of making a claim could revolutionise your business and help you achieve your financial goals.”

We can help you to identify eligible R&D projects (historic, current and future), highlight expenditure incurred on qualifying activities, optimise the amount of relief available, draft supporting documentation to HMRC and offer support in defending your claim in the event of HMRC raising queries.

Please do not hesitate to get in touch with Jon to discuss your situation and understand whether or not you may be eligible.

HMRC brings uncertainty surrounding entrepreneurs’ relief to an end

A much welcomed amendment to the Finance Bill 2018-19 is being proposed which should bring to an end to the recent uncertainty surrounding entrepreneurs’ relief, triggered by the 2018 Autumn Budget announcements (as covered in our recent blog).

The change comes following lobbying by the ICAEW and CIOT and is set out in this ICAEW blog post.

The proposed 2018 Budget amendments remain, but with an alternative to the new test where an individual’s shareholding in a trading company will qualify for entrepreneurs’ relief where either or both of the following conditions are met:

  1. By virtue of that holding, the individual is beneficially entitled to at least 5% of the profits available for distribution to equity holders and, on a winding up, would be beneficially entitled to at least 5% of assets so available, or
  2. In the event of a disposal of the whole of the ordinary share capital of the company, the individual would be beneficially entitled to at least 5% of the proceeds.

This new second part of the test should remove the uncertainty surrounding shareholders with alphabet shares as it indicates that where a company with alphabet shares is disposed of, then provided the shareholder receives at least 5% of the sale proceeds, they should qualify for entrepreneur’s relief even if they have not had an entitlement to 5% of dividends.

It is hoped that the amended test is adopted into law and provides an end to uncertainty for the vast majority of private company shareholders.

For further advice or a discussion about entrepreneurs’ relief, please contact our tax director, Claire Astley, on 01254 679131 or via email at claire.astley@pmm.co.uk.