Natural Resources and Research & Development - untapped tax payments?
21 November 2018
Are you missing out on a cash reward for your research and development activities?
Many companies in the Natural Resources sector will undertake activities that qualify for the UK’s R&D tax relief. Is your company involved in;
- Modifying brownfield topsides and subsea facilities?
- Improving modelling techniques to enhance resolution and confidence in the economic value of reservoirs?
- Developing more efficient construction, installation, drilling, operational and maintenance techniques?
- Undertaking new crude or catalyst trials to reform existing refinery processes?
If so read on:
Activities that use science and technology to create new, or make appreciable improvements to existing, processes, products or services often qualify as Research and Development activity. This R&D can be found at all stages of the project lifecycle from concept to decommissioning. Your company could be in a position to claim a tax payment up to 33% of qualifying R&D spend.
Two distinct schemes provide tax relief for research and development
The Small or Medium-sized Enterprise Scheme allows companies to claim a 230% tax deduction for qualifying spend. Loss making companies can surrender this deduction, resulting in a tax payment equal to up to 33% of the R&D qualifying expenditure.
The Research and Development Expenditure Credits (RDEC) applies to large companies where claimants currently benefit from a credit equal to 9.7% of the qualifying R&D expenditure. Loss making companies can apply for a cash payment.
Some key features of the schemes are worth considering, namely:
- Loss-making companies can receive a real cash benefit
- Profit-making companies will benefit from a reduction in their tax liability
- The IRF regime means that large upstream companies operating in the UK continental shelf can benefit up to 29.4% of the R&D expenditure
- Activities do not need to be ground-breaking or cutting edge - design and engineering development activities may also qualify!
- SMEs that have yet to trade are still eligible for R&D tax rebate if they make an election
It is also important to understand that a backdated claim can generally be made within two years of the end of the relevant accounting period.
How BDO can help you
We have a track-record of identifying potential opportunities for claiming R&D tax relief. We have supported over 500 R&D claims. Whether you are a first-time claimant or already make claims, we will support you in making sure you are claiming all available R&D tax relief. Get rid of that nagging feeling that your company may be missing a trick.
For more information or to discuss your R&D projects, please contact our Head of R&D tax, Paul Wong on [email protected] or Tax partner, Katherine Brown on [email protected].