United Kingdom

Innovation Reliefs and Incentives 

Is your business leveraging the most value from its innovation in the UK?

 

Innovation reliefs and incentives such as research and development (R&D) and Patent Box can provide UK businesses of all sizes with significant cash savings and incentives for funding innovative activities.  Innovative businesses can use these Government sponsored innovation-orientated incentives as part of their broader tax strategy to manage their tax position and help ensure optimum value is obtained from their innovative activity.


What incentives are available?


From an innovation perspective, the UK has a suite of incentives across the intellectual property (IP) lifecycle that can be used to reduce development costs and incentivise the ongoing commercial asset exploitation activity. Below is an overview of the key reliefs that have been introduced to promote innovation in the UK:

 

R&D Incentives for Revenue Expenditure:

Large companies

Small and Medium Enterprises (SMEs)

An additional tax deduction of 30% which translates into a 6.9% net benefit for a 23% taxpayer.

An additional deduction of 125% which translates into a 28.75% net benefit for a 23% taxpayer.

 

A taxable R&D Expenditure Credit (‘RDEC’) payable at 10% which translates into a 7.7% net benefit for a 23% taxpayer. The RDEC provides large companies in a loss making position with the ability to claim the RDEC as cash.

 

A loss making SME can obtain a payable cash credit at a rate of 24.75%.

 

 

 

 

 

R&D Allowances for Capital Expenditure:

A research and development allowance (RDA) claim can be made for capital expenditure on qualifying research and development. RDAs are a 100% allowance in the year of spend and are available for capital spend incurred to conduct R&D activity (e.g. premises and equipment).

 

Patent Box:

The regime, phased in from 1 April 2013, allows companies of all sizes to apply a reduced 10% corporation tax rate to profits attributed to patents plus other similar intellectual property types.

Data source: CAA 2001, CTA 2009, CTA 2010

 

Why KPMG

 

There have been many changes to UK innovation reliefs and incentives which mean that even greater benefits may be available. Yet many organisations may still not be aware of the extent to which their activities could qualify for the enhanced benefits. 

 

The KPMG Innovation Reliefs and Incentives Team is a dedicated national multi-disciplinary team of experienced tax, accounting, legal professionals and IT technologists, scientists and engineers. 

 

We can help you indentify the nature and extent of your innovative activity, quantify the relevant qualifying expenditure and document the methodology to facilitate prompt agreement with HMRC.  We can work with you in several ways, including offering a fully outsourced solution where we complete the whole claim preparation on your behalf. We can also offer a co-sourced solution where we work in close collaboration with you to add value in the areas where you most need our assistance.

 

Successful set up and delivery of these types of projects requires a dedicated and energised team, careful planning, efficient information flow and consistent execution.  We believe KPMG will deliver outstanding results because:

 

  • We offer a unique level of insight as our team of IT technologists, scientists and engineers have the right knowledge and skills across a range of industry sectors;
  • We have a tried and tested approach which helps enable efficient and robust claim preparation, whilst reducing the time spent by your team;
  • We have a proven track record with HMRC in the preparation and agreement of complex claim methodologies.

 

We work closely with a range of businesses to help them secure the appropriate tax reliefs they qualify for. Please get in touch to find out if these or other reliefs could benefit your business.

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 David Woodward

 

David Woodward
Partner
KPMG in the UK
020 7694 4171

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