Eligible for R&D Tax credits?

[Spiritas]

Is 20k expenditure on a custom Inventory/Sales management system (software and new hardware) likely to be eligible for R&D Tax credits?

System is still incomplete and work/expenditure is ongoing.

Thanks in advance.

 

[Adam93]

Hardware = capital expenditure and therefore no R&D tax relief.

R&D tax relief is only for revenue expenditure.

 

[jf-financial]

GrantTree (one of many R&D specialists) have a quiz below you can work through which may be helpful:

https://granttree.co.uk/

 

[SteveHa]

The first thing to do is ask yourself what technical or scientific uncertainty have you overcome that a suitably qualified professional in the field could not have deduced. If the answer is none, give up there.

 

[GillespieBS]

Just did the GrantTree questionnaire and it doesn't seem to be interested whether the expenditure is capital expenditure so I think it is just designed to suck people in and generate leads.

 

[SteveHa]

For the record, capital expenditure may be admitted as a part of an R&D claim. It does not, however, get the 130% enhancement.

 

[GillespieBS]

So it is more than likely that you get the exact same tax benefits if you didn't bother to do an R&D claim just you pay a specialist company a percentage to draw up an R&D report?

 

[SteveHa]

Not necessarily. For capital expenditure it may be possible to claim 100% rather than the writing down allowance, and so can still be beneficial.

Personally, I prefer our clients to write the brief. They are the experts, after all. I can tweak the wording as required.

And many of these specialist companies don't take advantage of HMRC's advance assurance on R&D claims, where the claim is effectively agreed with HMRC prior to being submitted, guaranteeing no enquiry for three years.

 

[Adam93]

Not necessarily. For capital expenditure it may be possible to claim 100% rather than the writing down allowance, and so can still be beneficial.

Only beneficial if you have run out of AIA at 100% - of which you get £200k. If you are relying on UK business forums for tax advice, I highly doubt the OP will be anywhere near the £200k limit for AIA.

And, you get no tax credit for R&D FYA for capital items.... so unless you're making a profit there is no relief for capital expenditure until you generate profits from which you can offset your losses.

You should be careful with R&D companies which state fees as a % of tax saved/tax credit - their motive is to claim as much as possible so their fees are as high as possible, which may leave you in hot water down the line - best looking for a fixed fee R&D specialist.