GUEST BLOG: GERALD THOMAS CHARTERED ACCOUNTANTS
The Professional Sports sector is one of the many industries that does not take full advantage of the generous Research and Development Tax Relief that could be available. Qualifying Research and Development (R&D) may be being carried out by professional sports clubs without them realising that a claim can be made. The relief is available to all Companies, not just the Sports sector.
HOW DOES THE RELIEF WORK?
Basically, Research and Development Tax Relief allows a Company which is an SME to uplift the cost of relevant expenditure by 130%. An example of how it works – Company A spends £100,000 on developing software which allows the club to analyse and monitor player movements, speed, power and more during a game. The expense is uplifted by a further £130,000 for Corporation Tax purposes resulting in an additional tax saving of £24,700 (using 19% as the CT rate), this is on top of the original tax allowance for the original £100,000 spend.
If the Company was not profitable in that period, the R & D expenditure can be surrendered for a cash payment. In the same example, the Company would receive a payment from HMRC for up to £33,350, (14.5% of the relevant expenditure) -a nice addition to cash flow.
WHAT PROJECTS QUALIFY
It may not be obvious to the Company owner that R&D is taking place because of the perception that it needs to be done by a person in a white coat in a lab somewhere. R&D takes place where a project seeks to ‘achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty.
In fact, if a project fails, this is tantamount to proof that R&D has taken place, and failed projects can still be claimed. There are wide parameters of eligible projects that may include:
- Development of software/applications/operating systems
- Substantially improving existing systems
- Developing and testing nutritional plans and their outcomes
The question to ask yourself is ‘Did we do something where there was there an element of uncertainty of the outcome at the outset’. If the answer to that question is yes, the possibility of an R&D tax relief claim should be explored.
Costs eligible for the relief include:
- Staff and subcontractor costs
- Materials and consumables
- Software licences
- Apportionment of overheads
There are different rules for large Companies and/or those that receive grant aid towards the R&D work. The relief is not quite so beneficial but can still be substantial.
MAKING A CLAIM
A claim can be made retrospectively, up to 2 years after the end of the relevant accounting period meaning the benefit could cover 2 years, not just one. A report detailing the projects undertaken and a calculation of the eligible expenditure is needed alongside the Corporation tax return.
For more information, contact Gerald Thomas Chartered Accountants on 01792 465155, email firstname.lastname@example.org or visit www.geraldthomas.co.uk