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R&D and Patent Box

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Open for business, open to innovation

The UK Government has expressed its commitment to making the UK a competitive place to do business. Various tax incentives have been put in place to help companies - multinationals and SMEs alike - to innovate and grow in the UK. From Enterprise Zones to R&D Expenditure credit (RDEC) and Patent Box, there is a reason for just about every company to base their operations in the UK.

Are you aware of all the tax incentives?

From ideation to commercialisation, the UK Government supports this policy objective through incentives at each stage of the innovation lifecycle:

  • Enterprise Zones: 24 zones have been created in England, allowing businesses located there to claim up to 100% Business Rates relief (worth up to £275,000) over a 5-year period. Some Zones have sites where you can claim Enhanced Capital Allowances and many Zones provide even more benefits
  • R&D tax incentives: If relevant conditions are satisfied, R&D costs can be reduced by up to around 30% for SMEs (based on the main corporation tax rate) or by around 7% for larger companies
  • Reclaimable tax credit: SMEs making losses can reclaim tax credits worth up to 24.5%
  • R&D Capital Allowances: First-year allowances of 100% are available to accelerate tax relief for the cost of equipment and premises in which R&D is carried out.

R&D expenditure credit

The R&D expenditure credit (RDEC), effective from April 2013, is a credit against tax liabilities of up to 10% of qualifying expenditure for larger companies and SMEs able to claim under the large company scheme. Moving R&D above the line will reduce the cost of R&D in financial statements - similar to a grant - hence delivering a higher operating profit and making it more visible to technology departments. Read more on R&D expenditure credit.

Patent Box

The Patent Box regime, effective from 1 April 2013, aims to create a competitive tax environment for companies to develop and exploit patents in the UK, and encourage companies to locate high-value jobs associated with intellectual property (IP) in the UK. Used effectively, Patent Box will allow qualifying companies to claim an additional tax deduction, giving an effective tax rate of 10% on the profits arising from the use of patents. Read more on Patent Box.

How Deloitte can help

We find that many companies are not aware of which activities could qualify for the incentives. Deloitte employs more than 2,500 tax professionals in the UK. Our Innovation Tax team comprises engineers, technologists, transfer pricing specialists, tax specialists and patent attorneys. We can help you:

  • Prepare and manage your research & development claims, using our knowledge and experience of technology disciplines, costing systems, accounting principles, and project management
  • Manage the Patent Box process from identifying patentable technologies and mapping patents to income streams, to defining Patent Box methodologies, calculating the tax impact and agreeing approaches with HMRC.

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  • Responsible Tax
    'Practical guidance on how to arrive at a tax strategy which delivers sustainable outcomes.
  • Home or away?
    Tax reliefs for innovation in the UK.
  • R&D tax credits
    A makeover for the UK.
  • Patent Box
    Benefitting your business in the UK.
  • Above the line webinar
    Find out how the tax credit applies and how you can benefit.

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