Last month’s budget saw the introduction of further improvements to research and development (R&D) tax credits:
“As innovation becomes increasingly important in maintaining the UK’s globally competitive position, R&D tax credits play an even greater role in the UK’s response to globalisation. The Government is introducing further improvements to R&D tax credits, increasing the enhanced deduction of the SME R&D tax credit to 175 per cent and the large company R&D tax credit to 130 per cent from April 2008.”
Source: Budget 2007 - Economic and Fiscal Strategy Report, Chapter 3
Research and development has a distinct statutory meaning. DTI guidelines state that:
- R&D for tax purposes takes place when a project seeks to achieve an advance in science or technology.
- The activities that directly contribute to achieving this advance in science or technology through the resolution of scientific or technological uncertainty are R&D.
- Certain qualifying indirect activities related to the project are also R&D. Activities other than qualifying indirect activities which do not directly contribute to the resolution of the project’s scientific or technological uncertainty are not R&D.
Source: R&D tax relief: conditions to be satisfied: DTI guidelines
If your business undertakes R&D that matches this definition, you may be entitled to tax relief and should investigate what credits are available and how to claim.
Whether or not tax credits are available to your business, the principles of innovation, research and development are key drivers of competitive advantage. By identifying customer need and anticipating future change - a research, design and development process can make your business more profitable and productive.
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