Research and Development (R&D) and RDEC tax credits

We are regarded as one of the UK’s leading experts in this area. Backed up by as PhD in science we are able to ask the right questions to maximise the quantum of the R&D claim.

The R&D tax credit landscape and legislation has changed significantly in the past few years. There is now a new merged scheme combining the former SME scheme with the RDEC scheme, and a special scheme for R&D intensive companies. Most companies are in the process of transitioning to one of the new schemes.

At the same time HMRC has launched an unprecedented attack on many R&D claims and significant time and effort is required to defend valid claims.

We are at the forefront of understanding what constitutes a qualifying activity, how to prepare a comprehensive and robust claim, and how to defend it in the event of an HMRC challenge.

The best way to explore whether any of your expenditure qualifies is to discuss it with us. With a PhD in scientific research, and 25 years’ experience in maximising claims, we are one of the country’s leading specialists in this area.

The Patent Box regime provides tax relief for UK companies exploiting certain qualifying intellectual property (IP) rights. The regime effectively provides for a 10 per cent tax rate on qualifying profits derived from UK or EU patents.

Under the regime, the profits of a particular ‘stream’ of IP subject to the reduced rate will decrease where the qualifying R&D sub-contracted to connected persons and other expenditure on qualifying IP rights is more than 30 per cent of the cost of R&D (including that subcontracted to third parties) contributed by the company claiming Patent Box treatment. This result is achieved by the introduction of a ‘nexus fraction’ and is clearly designed to stop multinational groups ‘moving’ overseas IP into the UK to benefit from the reduced tax rate.

A company qualifies for relief if it:

• Owns patent licences in qualifying intellectual property (IP) rights, or owns an exclusive licence in respect of those rights at any time during an accounting period
• It will be necessary to stream every individual IP right, patented product or product family. This means that a company with five patented products will need to carry out five separate calculations with income and expenses allocated to each
• As an extra step in the calculation the ‘nexus fraction’ is applied to link the patent box benefit more closely to the R&D activities carried out by the company.

Patent box claims and calculations are not straightforward; we have significant experience in preparing reports and supporting claims.

Nearly all our clients have overseas operations. We specialise in advising companies as to how best structure overseas operations to satisfy commercial objectives whilst minimising overseas taxes. There are a number of business structures that may be relevant and we can help you to identify the one that best fits your commercial objectives whilst minimising the burden of overseas taxation.

We can also help determine appropriate transfer pricing policies to comply with the rules in various countries. We work with a specialist provider to produce bespoke benchmarking studies where these are advisable. Factors to consider when moving into new territories include:

• Branch (permanent establishment) or subsidiary
• The use of early years’ losses
• Transfer pricing
• Profit repatriation to the UK
• Structures to minimise higher rates of overseas taxation and to avoid any risk of double taxation
• Ensuring that the group structure is attractive to potential acquirors and will withstand scrutiny during robust due diligence

We advise on the raising of finance from Business Angels, Crowd Funding, Venture Capital and Private Equity houses, traditional banks, various growth funds and grant agencies, and through an Initial Public Offering on one of the Stock Markets (typically AIM or NASDAQ).

We specialise in tax-efficient financing including the SEED Enterprise Investment Scheme (SEIS)  and the Enterprise Investment Scheme EIS). We provide advice on whether the company will qualify under one of these regimes and obtain prior clearance/approval from HM Revenue & Customs.

Equity incentives are key in motivating, rewarding and retaining key management and other employees and consultants.

We advise on a number of statutory (e.g. EMI/CSOP) and non-statutory share schemes (unapproved options, growth shares, LTIPs etc).

We design scheme rules, build in performance and vesting criteria, communicate the rationale and tax benefits to staff, and obtain valuation approval (where applicable) from HM Revenue and Customs.

Many of our clients are early or mid-stage technology companies and are not yet profitable. For those which do make profits. extracting value from a business is no longer a simple choice between dividends or salary/bonus. There may be interactions with other issues such as maximising the spend for R&D purposes.

Whilst it goes without saying that owner-managers need to extract cash in a tax-efficient way, companies need to retain funds for working capital, satisfying bank covenants and showing a strong balance sheet.

We work with our clients to help them achieve the right balance both in the short term and for the longer term in maximising the ultimate value for the business.

Many companies do not maximise their capital allowances claims. This is often the case where qualifying expenditure is “hidden” behind walls, in roof spaces and in ducts.

At the most extreme there can be qualifying expenditure beneath or running through a concrete flow. There are special and valuable reliefs available for certain types of energy-saving or eco-friendly components in a building.

Many companies do not realise that capital allowances can be claimed on second-hand buildings where full claims have not been made in the past. We have expertise in identifying relevant expenditure and maximising claims.

Where claims are particularly complex we can work with quantity surveyors to help us identify potentially qualifying expenditure. The best way to maximise a claim is to be involved from the outset of a project, working with design engineers to present the construction in the most favourable way to maximise a capital allowances claim.

We advise on all aspects of corporate activities, including mergers, acquisitions, flotations, sale to an EOT and company reorganisations. We have advised on several hundred corporate transactions and is experienced in structuring these in the most tax-efficient way.

This is key to maximising shareholder value. Shareholder and corporate taxation are inextricably linked and ultimately it is the burden of all taxation that needs to be considered in maximising ultimate shareholder value.

We have considerable experience in ensuring that Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) is maximised so as to pay tax at a lower rate on the first £1 million of the gain on the final sale proceeds.

For most groups of companies there comes a time when the current group structure may need revising. This may be as a result of commercial pressures (changes in products or services), planning for certain shareholders to exit the business, planning for a sale of one or more of the activities, or a total sale of the company. We have considerable experience in areas such as:

• Demergers
• Share reorganisations
• Company repurchase of own shares
• Substantial shareholding exemption
• Sale of some or all of the company to an EOT
• We negotiate advance clearances with HMRC and ensure that there are no unexpected tax surprises

During the corporate transaction we review and advise on sale and purchase agreements, tax covenants, tax warranties and indemnities and the overall deal structure.

Whether your family wealth has been earned as an entrepreneur, made through investments, or inherited from the family, the focus on effective and sensible tax planning has never been greater. In a fast moving world, it becomes ever more important to receive up to date pro-active advice to ensure you are managing your affairs as efficiently as possible to protect your wealth for you and your family.

We provide advice to a wide range of high net worth clients, including families, entrepreneurs, professionals, and non UK residents. We provide a complete solution, focusing on:

• tax efficient structuring of your businesses, including consideration of profit extraction, inheritance tax protection and capital gains tax mitigation
• family wealth structuring using trust, partnership and corporate holding vehicles
• structuring for private equity interests, including tax-efficient investment of funds
• structuring for property investments and development
  non domicile and residence planning
• matrimonial tax planning (see also our Expert Witness services below)
• tax investigations and disputes with HMRC
• wealth management including advising on the appropriateness of pension and tax efficient investments
• We cannot provide specific investment advice, but can work with FCA-regulated firms to provide this.

Our approach is very personal. Where you are trusting your wealth with your advisors, you need to have the same trust in them as you do your friends or partners. Therefore, the “chemistry” between you and us is paramount.

Our approach, having met you, is to ask you to construct a “personal statement” for which we provide a framework. This “fact find” helps us to establish what motivates you, what your attitude to risk is, and most importantly, what your goals and aspirations are. We then review your current income and assets, look at what you need for the future, and plan an appropriate strategy which is “fit for purpose” now, and provides flexibility for the future.

We can provide expert witness reports in support of various situations and have experience in representing our clients in Court. Our services include giving expert witness testimonies in areas such as valuations, the incidence of tax on various transactions, and matrimonial issues, where we work with family lawyers.

We also have an arrangement with a firm of accountants which specialises in divorce financial matters whereby we can jointly produce reports on a client’s financial affairs and calculate relevant tax liabilities.