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Would this be construed as R&D

Would my client be eligible for R&D Tax Relief

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My client sole diector/employee of a limited company has one large Pharmaceutical company as a client.

He is responsible for the finding and developing a new drug for this client.  

However,  it seems all the R&D work is carried out for his client and cannot see any evidence of R&D in his own company. 

He doesn't have a lab or office premises. Perhaps he may do some research on drugs in his own time which I think is about it.

I know the R&D threshold seems low but he is adamant this qualifies for R&D tax relief.

 

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By tom123
23rd Nov 2020 11:55

I would say he is a paid subcontractor of big pharma, who is the one carrying out the R&D

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Replying to tom123:
Psycho
By Wilson Philips
23rd Nov 2020 12:12

But we don't know how 'big' big pharma is. OP says 'large' but is that 'large' in the R&D sense or just a general comment on the size of the contractor? Then again, we know precious little about the nature of the work and whether it would qualify in any event as R&D in the hands of the subcontractor.

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Replying to Wilson Philips:
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By sanjay100
23rd Nov 2020 12:38

Large is probably irrelevant and relates to the contractor. If the work is solely carried out for the Pharmaceutical company then I would assume R&D will not apply. Only if the R&D work was carried out in his own company then there would be a chance of tax relief but I cannot see any concrete evidence. I know if he decides to go to these so called R&D tax specialists they will probably say yes

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Replying to sanjay100:
Psycho
By Wilson Philips
23rd Nov 2020 12:42

"Large" is most definitely not irrelevant. So-called R&D tax specialists tend to know why.

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Replying to sanjay100:
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By frankfx
23rd Nov 2020 12:55

sanjay100 wrote:

Large is probably irrelevant and relates to the contractor. If the work is solely carried out for the Pharmaceutical company then I would assume R&D will not apply. Only if the R&D work was carried out in his own company then there would be a chance of tax relief but I cannot see any concrete evidence. I know if he decides to go to these so called R&D tax specialists they will probably say yes

Vous ne dois pas être aussi cynique.

However, R & D claims firms do seem to use a different language to us and our clients . With Gusto .

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Replying to frankfx:
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By Truthsayer
23rd Nov 2020 13:20

Devez, not dois. Tu dois, vous devez.

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By Anonymous.
23rd Nov 2020 12:50

I know nothing about the subject but had a look at this:

https://www.gov.uk/guidance/corporation-tax-research-and-development-rd-...

And this doesn't appear to help your client's cause (assuming that the guidance reflects the legislation, obv):

"The project must relate to your company’s trade - either an existing one, or one that you intend to start up based on the results of the R&D."

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By The Dullard
23rd Nov 2020 13:12

Question 1: Has he actually spent any money on the research other than his own time?
Question 2: Is he paid a salary?

If the answer to both of those questions is no, then all the other f***wittery is irrelevant.

Also, have you considered IR35 in relation to this client? You seem to be suggesting that he's a quasi-employee.

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By Jdopus
23rd Nov 2020 13:11

Your client is probably thinking of the RDEC scheme. There's a little known rule in there that allows subcontractors of large organisations to make a claim because the large company themselves can't claim this. It's particularly common in the field you're describing but you'll still need to review the nature of the work itself and check against other conditions of the scheme:

"R&D expenditure credit (RDEC) replaced the large company scheme in April 2016.

RDEC can also be claimed by small and medium-sized enterprises (SMEs) who have been subcontracted to do R&D work by a large company or who have received a grant or subsidy for their R&D project.

You might do this as a SME if you cannot claim R&D tax relief for SMEs."

https://www.gov.uk/guidance/corporation-tax-research-and-development-tax...

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Replying to Jdopus:
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By sanjay100
23rd Nov 2020 14:54

Thank you for the information this is most useful. On prima facie looks like my client is eligible to claim. He would only be able to claim his Salary.

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By SWAccountant
24th Nov 2020 09:17

Salary?

I think your client has bigger problems than R&D eligibility.

Edit: Ignore me. you presumably mean the salary that his company pays him, not the salary he receives from the pharma co.

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Ivor Windybottom
By Ivor Windybottom
23rd Nov 2020 13:21

Possibly subsidised expenditure (i.e. paid for by pharma co.) that could fall under RDEC, but you have to question if this really is R&D as it seems possible that a similarly competent person could do this work - i.e. is it sufficiently innovative/difficult??

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Lone Wolf
By Lone_Wolf
23rd Nov 2020 16:03

Responders seem to be asking too many questions here. Clearly none of you are R&D specialists.

Don't cha know that almost every company carries out R&D, even if they don't know it.

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