Tax

HMRC Gives Self Assessment Taxpayers More Time

HM Revenues and Customs Gives Self Assessment Taxpayers More Time

Taxpayers have been given a breathing space by HMRC who are postponing late filing and late payment penalties.

HMRC recognizes the pressures faced this year by Self Assessment taxpayers and that COVID-19 is still affecting the capacity of taxpayers (especially those who run small businesses) and their agents to meet the 31 January deadline.

HMRC are encouraging taxpayers to file and pay on time but are waiving the penalties for late filing and late payment for one month, giving you extra time to file your 2020/21 tax return and pay any tax due if you need it.

The deadline remains 31 January 2022 and taxpayers are still required to pay their Self  Assessment by this date with interest being charged from 1 February on any outstanding liability.

However, providing tax returns are filed by 28 February 2022 and any payment due is paid in full or a Time to Pay arrangement is set up by 1 April, the late filing and late payment penalties will be waived.

If you are a Self-Employed taxpayer, you will still need to ensure your annual Class 2 National Insurance contributions are paid on time to ensure any claims for certain contributory benefits are unaffected.

Further information can be found at Gov.UK

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Tax

Our Guide to R&D Tax Credits – How to Claim R&D Tax Relief ?

If you are a UK company that has invested in innovation, you could be eligible for R&D tax credits.

What are R&D Tax Credits?

Companies in the UK are able to claim tax relief for their R&D activity.  The scheme is administered by HMRC and is intended to support businesses with their products and processes by boosting innovation. If you are spending money on your innovation, you can make a Research and Development tax credit claim.

Whether you are a large company or a small business there could be an R&D solution for your company.

For small and medium enterprises (SMEs) the incentive is Corporation Tax relief that can reduce a company’s tax bill or result in a payable tax credit (SME R&D Relief Scheme).

For large companies, the incentive is the R&D Expenditure Credit (RDEC).

Eligibility for R&D Tax Relief

The business must:

  • Be a limited company in the UK that is subject to Corporation Tax
  • Have carried out qualifying research and development activities
  • Have spent money on these projects

R&D Tax Credits for Small Business

The Small and medium-sized enterprises (SME) R&D Relief can be claimed if you are an SME with:

  • Less than 500 staff
  • A turnover of under 100 million euros or a balance sheet under 86 million euros

Many companies, including start-ups, fall within this category.

 

What counts as Research & Development?

The project must be specific to make an advance in science or technology and must relate to the company’s trade.  The company must be taking a risk by attempting to solve scientific or technological uncertainty. This can include creating new products, processes or services or changing or modifying an existing product, process, or service.  It is important to note that the R&D doesn’t have to have been successful to qualify but the project should have set out to make an advance.

Research and Development can be in any sector from food processing to mechanical engineering, construction and information technology.

 

What costs qualify for R&D Tax Relief

The key qualifying costs are:

  • Staff costs – apportioned to the time spent on the R&D project (salary, NIC, employer pension)
  • Software – any software purchased for R&R purposes and apportioned to the project if used subsequently
  • Subcontracting R&D costs – claims can be made for 65% paid to a subcontractor
  • Utilities & Consumables – water, fuel, power, and material used for the project
  • Prototypes – all R&D prototypes

 

How much can a company claim?

If this is the first claim a company has made the claim can cover the last 2 accounting periods. All subsequent claims can be made annually.

Claims can be worth up to 33% of the total R&D costs providing the criteria for R&D Tax Credits have been met.

 

How will the claim be paid?

Under the scheme, the R&D tax credit reduces the company’s taxable profit.  If the company recorded a profit for the period, it is claiming R&D expenditure, the overall Corporation Tax due will be reduced by the amount of tax relief awarded.

If the company is making a loss, it may be able to claim a cash credit.

Depending on whether the company is profit-making or loss-making will determine how the R&D tax credit is paid.

At AccountsPro we can help identify tax-saving opportunities such as R&D tax credits and can help reclaim R&D costs from HMRC.  Contact us for a free consultation.