R&D Relief? R&D Relief? - Page 3
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Thread: R&D Relief?

  1. #21

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    Quote Originally Posted by Sosoomii View Post
    This amounts to several hundred hours of my time and maybe £10k in sub-contracting the building of prototypes. There is no guarantee that the prototype will work (as well) as intended, though obviously I hope it does and I can then start full production.
    This sounds very much like R&D. A lot of discussion in this thread, first page or two might not be that useful to you but it gets better: https://www.contractoruk.com/forums/...-ir35-r-d.html

    I would definitely advocate Advanced Assurance, it was an absolute winner for me, they are very, very helpful.
    Quote Originally Posted by Sosoomii View Post
    1. Can I somehow claim my time for R&D relief given that I can’t see how to keep timesheet records for this activity and anyway my income is mostly dividend with a small salary, so any nominal hourly rate would be v small. My accountant has suggested I could set up a second ltd co and bill that one from the first, but I don’t understand how that will work?
    I was told by Advanced Assurance if I don't have precise time records to use a reasonable estimate for my time, but for conservativism to estimate a little low.

    Basically, as an example, if you work 300 hours a year on the project and do other work for 1500 hours, 1/6 of eligible costs for you will be eligible for the credit.

    Eligible costs for you will be salary (minimal), employer NI (minimal) and pension. As I said in the linked thread, it may be worth it, if you have a high percentage of R&D, to pay a higher salary that year, at least up to the Personal Allowance threshold.

    You may also want to push more pension contributions into the year that has the tax credit. Suppose you make contributions of £15K a year -- 1/6 would be £2.5K, which isn't nothing but hardly game-changing. But suppose you defer the contribution from the prior year and bring forward the next year's contribution all into that year, making your contribution £45K (if you deferred the prior year's you can use its allowance and exceed £40K). Now, you've got tax credit on 1/6 of £45K, or £7.5K -- now it begins to add up a little.
    Quote Originally Posted by Sosoomii View Post
    and maybe £10k in sub-contracting the building of prototypes....

    2. Does the subcontracted prototype build qualify for R&D relief of is that capital expenditure?
    Probably not, but read the documentation carefully and see if you can categorise it as other than "sub-contracted". Can you hire the person doing it on a FTC? Then, it isn't sub-contracted. Is it just time you are paying or is there software / licenses to be purchased?

    Quote Originally Posted by Sosoomii View Post
    Do other contractors have experience of doing R&D outside of client based business?
    Have done quite a bit both inside and outside client based business. Discussed on the thread to which I linked.

    Good luck with it.

  2. #22

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    Thanks very much, that’s really useful and encouraging! I shall take some time to read the links.

  3. #23

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    Quote Originally Posted by Sosoomii View Post
    Oh please, I might have been researching the efficacy of face masks and injecting mice with coronavirus for all that it matters to the original question. Are you saying that it is impossible to run a ltd company business with an element of privately funded research and development?
    You'll soon realise the the purpose of some on CUK isn't to answer the question as given, but to answer a different question that provides a better chance of "winning" the argument.

  4. #24

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    Quote Originally Posted by Paralytic View Post
    You'll soon realise the the purpose of some on CUK isn't to answer the question as given, but to answer a different question that provides a better chance of "winning" the argument.
    Or maybe they don't actually know how to answer the question as given.

    In this case, it's more that some were of the view that the question as given might be moot, which in my view is a legitimate point to raise, if frustrating to the person who knows it isn't moot.

    Interestingly, I had a similar issue with the thread I linked to above.

  5. #25

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    I agree that the model aeroplane example is R&D. I've worked for companies who claim R&D tax credits for far more dubious projects.

    I think the accounts idea of spinning up another company just to milk the tax credits is stupid.
    Setting up another company to own and develop the product is probably a very good idea and separates it from your contracting income. Use seed capital from contractor CO to startup if needed.

    If your accountant suggested the new company for the first reason then get a new accountant. If for the second then talk to him about how this will work and do a business plan (like a proper business).
    See You Next Tuesday

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