North West Manufacturing Companies - Tax relief for product and software development

There is a little known tax relief for companies, called Research and Development Tax Credits.

Even as a leading North West accountant, this doesn’t sound too exciting to me as it conjures up visions of laboratories and test tubes, but this is not the case.

Where expenditure qualifies, a company, including those in the Lancashire area, can get an additional 75% relief on its costs e.g. if you spend £100K, then tax relief is given on £175K

The relief largely covers staff costs and consumables, but also some other expenses.

The North West is seeing difficult times and cash flow is especially tight for many businesses. I think it is therefore imperative that where possible tax reliefs should be taken.

What are the criteria for Research and Development Tax Credits?

The project must seek to achieve advancement in science and technology through the resolution of scientific uncertainty. Our experience tells us that the taxman is likely to ask the following questions:

• What was the scientific or technological advance?
• What were the scientific or technological uncertainties?
• How were these overcome?
• Why was the knowledge not readily available?

These questions may seem a bit daunting, but here at Ashworth Treasure Accountants in Lytham, we have dealt with this area many times and would be able to help you with the answers.

I have a few examples of projects that could qualify and hopefully, they will help you to see that the some of the work your manufacturing company does may well be eligible for this tax relief.

1. Automation of a manual production process
2. Software project resolving conflicts within hardware or software, where existence of a problem area and the absence of a known solution have been documented
3. Development of new improved spark plugs to use in an existing petrol engine
4. Finding a new active ingredient for a weed-killer and developing a formula to incorporate this into a commercial product
5. Design of a new DVD player which is an appreciable improvement on others in the market place. It incorporates a new control mechanism for the laser that ‘reads’ the disc.

If you are involved with a manufacturing business in Lytham, or further afield in Lancashire or the North West and would like to talk about specific tax advice with a specialist firm of accountants, then please get in touch.