What does Corporate Tax (Research & Development Tax) mean?
The Indian government has given support in the form of various tax incentives to promote investment in Research and Development (R&D). The benefits are essentially available for income and capital expenditure incurred by the companies in conducting out their business-related R&D operations, including donations to various scientific research universities or organisations.
Tax credits for research and development (R&D) are important policy support that rewards UK businesses for investing in technology. Corporate tax (R&D) will only help the company to apply for tax relief if the company is liable for corporate tax.
Research and Development Tax Relief Scheme: Only businesses listed under the Small or Medium-sized Enterprise Scheme or the Large-scale Enterprise Scheme can derive from the claiming relief.
What is the eligibility for claiming Relief under Research & Development?
- The organization seeking the relief should recognize that Research & Development programs are aimed at improving general science or technology awareness or capabilities.
- The venture must be connected to the existing business of the organization or where it is a start-up based on Research & Development performance.
- Where the company claims tax relief under the SME program, it must own any intellectual property that may benefit from the venture.
What are the Research & Development Cost that are eligible for relief?
where the company as well as project fulfill the conditions essential to claim tax relief on revenue expenditure i.e. Business day-to-day expenses excluding capital expenses on assets such as:
- Employees Costs connected to employees who are directly involved in Research & Development except consultants, agency workers or managers who have managed to enter into the employment contract.
- Providers of staff to whom the company pays, who are actively involved in Research & Development.
- Material that can be used or converted to carry out our Research & Development activities
- Clinical trial cost
- Utilities such as power, water, fuel used in the Research and Development. These does not include telecommunication cost and data cost
- Computer software
- Sub contracted Research & Development Expenditure
What is the procedure to claim Research & Development Relief?
1) When relief is required to be claimed?
In your Corporate Tax Return or amended return, the company may claim R&D tax relief. The deadline for that is 2 years after the end of the applicable financial period for corporate tax.
2) How to claim the relief?
- The corporation must claim tax deductions for Research & Development by putting an X in either box 99 (SME) or box 100 (large companies) of your Corporate Tax report, and in both cases put the additional expenditure in box 101 — that is, the actual amount spent multiplied by 230% or 130% as necessary. This improved statistic should also be included in your gain calculations (box 3) or loss estimates (box 122) for the duration.
- where your company is a small and medium-sized business and you want to turn some or all of the tax relief into payable tax credits, you will also have to add the amount payable to the corporation in box 87, box 89 and box 143.
Which documents are required to be maintained?
For Research & Development tax relief claims, there is no statutory requirement for keeping records. Nonetheless, the general responsibility for Corporate Tax is to retain adequate records to verify the entries on your Corporate Tax report.