research and development

research and development

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Hello.

Have a client developing special software to use in their business and it will be made available (if it works) to third parties. The software is unique in that there is currently nothing that does what this will do and is specific to the trade of the clients business. It is doing new things (not just old things in a new way; this is a whole new thing).

So I have a couple of questions please:

a) can anyone recommend where to go to help me make sure the R&D claim is correct please as this is a new area to me. Despite my research into it, I don't feel confident enough to DIY. I think I understand it, but "I think..." is usually a dangerous starting point.

b) in the accounts, do I just treat the expenses on the software development as expenses on P&L? The spend last year was around £40,000 and it looks like it will be double that this year. Or should it be capitalised? 

Many thanks for your help.

Replies (4)

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By refs8
28th Dec 2013 22:52

Try Leytons we have used them for a client based in London I believe !

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By Novakova
29th Dec 2013 08:34

R&D
Plenty on advice is also on HMRC website.
In this case the R&D expenditure will probably be primarily wages. If it is a mini company employing directors paying wages under NIC limit plus dividends, claiming R&D will be neither worthwhile nor advantageous.

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Rachel Davies
By Rachel Davies
29th Dec 2013 13:33

I can help you with this, pm me if you would like to discuss. It's always worthwhile a quick exploration to see if a claim could be worth it, if you don't do it for your client someone else might!

Rachel

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By merlyn
30th Dec 2013 09:49

R&D

There are lots of firms out there who can assist and most work on a contingent fee basis so if the clients claim is rejected then they won't be invoiced.  Usual fee structure is 15-25% of the claim value.

Whichever firm you use they should help the client in working out their R&D costs and also write a technical summary which explains to the HMRC the work undertaken and why it meets their guidelines in terms of R&D, both of which are submitted with the clients CT600 and whilst not mandatory greatly reduce the risk of an enquiry.

For an into to a client you should be looking at 10-20% comission once the claim has been successful and the client has paid the R&D firm.

As Novakova said the staff costs you can claim for are only those paid via PAYE, so Directors dividend payments are not allowed.

Just one thing to watch for is some firms are now including a non-refundable admin fee hidden in their contract, so if the clients claim is rejected by the HMRC they end up out of pocket.

Also just because a bit of sofware is unique, doesn't automatically mean it will meet the HMRC guidelines for R&D as there still has to be scientific or technological uncertainity at the start of the project.

On the question about capitalising, there was a very good blog entry by GrantTree covering just this - http://blog.granttree.co.uk/post/26894339763/r-d-tax-credits-and-capital-expenditure

We aren't taking on new clients at the moment, but happy to offer any free advice I can as I've assisted over 200 software companies with R&D claims, so know how it works quite well.

 

 

 

 

 

 

 

 

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