Our Services

Our breadth of experience and multi-disciplined team means that we can
provide a range of services to meet our clients’ needs, whether they are
small or medium sized business or large corporate organisations with
global operations.

How can we help you?

We provide a range of services and can discuss these with you to find the
most appropriate approach given your claim history, your preference and our
experience of your industry:

• Full claim preparation ; we undertake all aspects of the work from identifying eligible activities to quantification of the claims and liaison with HMRC if required to agree the claim.
• Scoping study ; this is a detailed session to enable you to better understand the potential benefit available to you and to identify how best you could move forward in making a claim.
• Support ; you may choose to prepare aspects of the claim in-house but to ask us to be involved in certain areas. For example, you may want us to help you understand the scope of your eligible activities but to quantify the claims yourselves.
• Dealing with HMRC enquiry ; you may have prepared a claim and submitted this to HMRC but request assistance in dealing with any specific queries they have relating to the claim.
• Training and guidance ; we provide a brief training presentation to get you started in preparing your claims internally.

Contact Us

Call us on +44 (0)1869 346095

Skype ge.ela8 or tl.ela8

Email us Here

Often the first step is to have a brief (approximately 30 mins)
discussion with you to understand at a very high level the company’s activities
or area of expertise in order that we can give you an idea of how best you can move forward
with the preparation of a claim.  This initial conference call is entirely free and can even be conducted over Skype if you prefer. For this briefing call it is important to have some basic details available and also to have on the call, where possible, the most senior person available who understands the technological activities of the business (see below).

Alternatively, you can drop us an email with your contact details and any specific queries you have and we will get back to you.  If you just want a quick opinion on whether you are likely to be doing eligible work, and feel your website gives a good overview of your company, just email this address to us. We will respond with our view and comments on the next steps.

Basic information that can help with an initial assessment

• are you already claiming R&D tax relief? If so, what is the size and nature of your claim?
• are you an SME (what is the ownership structure of the business)?
• number of employees, turnover, gross assets?
• how many technical personnel do you have? 
• is there an organisation chart which sets out the team/business structure?
• what is the nature of the scientific or technological activities?
• is there a website that we can visit? 

About ela8

Gareth Edwards, Managing Director of ela8 limited, was a director of the award-winning Deloitte R&D Tax Services team until April 2007 and since then has worked independently with a wide-range of clients, from international groups to small SMEs, to bring significant benefit to them through the submission of claims for R&D tax relief. Gareth’s background is as an R&D professional and entrepreneur and his continued interest and insight into technology means that he is able to understand the technological challenges faced by his clients and identify how their work meets the criteria for eligibility for R&D tax relief.  Gareth is able to talk to the technical personnel within the business to extract from them the scope and basis for the R&D claims and to assist in presenting this in a way that the tax authorities will understand and accept.

Gareth has over 25 years experience of active R&D development, gained in a wide range of industries but specialising mostly in software, microelectronics, telecommunications and medical physics. He held a number of senior R&D posts for major international companies and ran his own SME hi-tech development and manufacturing company, before joining the R&D Tax Services team at Deloitte on its inception in 2003. This experience means he is able to understand and effectively operate with a wide range of companies and environments, and is able to communicate with technical specialists in their own language. He holds an MA from Cambridge University, is a Member of the Institute of Directors, and a Fellow of the Institute of Physics (email Here).

Teresa Latch's background until 2003 was in law and corporate tax work.  From the introduction of the R&D tax relief regimes in the UK, Teresa worked within the Deloitte team providing a range of services to a client base ranging from the pharmaceutical industry to engineering consultancies, aerospace and defence equipment providers.

Teresa was one of the initial members of the Deloitte R&D Tax Services team and her experience in this sector since 2003 means that she has developed a good working relationship with HMRC, has prepared a significant number of claims for both SME and large companies and understands the key areas of difficulty that applicants face when putting together their claims, particularly as regards the quantification of the claims.  She is a Batchelor of Laws and undertook her chartered accountancy training (ACA) whilst working for Andersen (email Here).

For more specific detail as to how we can help, please click Here.

 

 

News - March 2012 Budget Updates... 

A major change has been confirmed in the 2012 budget: to introduce an "above the line" payable tax credit for accounting periods starting after 1 April 2013. The exact details of this are under consultation, but the rate is currently proposed to be 9.1% of qualifying costs and taxable, the scheme being aimed at Large Companies. The major benefit is that loss-making Large Companies will be able to receive immediate  cash payments for the first time. At this rate, the broad effect of the benefit is equivalent to that of the current Large Company regime at the tax rate that will then be in force, around 7% of qualifying costs. It is not proposed that any similiar scheme should be operated for the SME regime, although of course SMEs may benefit when claiming under the Large Company scheme. The exact details of the new scheme are currently in consultation.

• The rate of additional deduction for SMEs has increased again to 125% from April 2012. For a loss-making SME, the rate of cashback has reduced to 11% from April 2012, keeping the effective cashback benefit at the same level. 

Tax Year	Additional Deduction	Main CT rate	Effective Rate of Benefit	Cashback Benefit
2010	75%	28%	21%	24.5%
2011	100%	26%	26%	25%
2012	125%	24%	30%	24.75%

• The removal of the PAYE/NIC limit on the cash credit that can be claimed has been confirmed.  

More guidance is planned to address a number of areas. This is great news and demonstrates a commitment to the SME regime, with the Government taking heed of advice from specialist consultancies such as ourselves on the effectiveness and failures of the existing legislation. 

The increase in the additional deduction rate and removal of the PAYE/NIC cap will ensure that innovative start-ups and existing small businesses really see the benefit of this relief, even if they use third party expertise to help in their development work (through hiring expert contractors and/or subcontracting pieces of work).

The change to a payable tax credit will be a big boost to loss-making Large Companies, and it is hoped that the regime will be kept as simple as possible. The falling corporation tax rates, though welcome, mean that the benefit of making R&D tax claims is reduced and it is important to keep the costs to claim as low as possible.

On a final note, the 2012 Finance Bill will contain final details on the introduction of a Patent Box. The patent box will provide a reduced 10% corporate tax rate for profits from qualifying patents. The scheme is expected to operate from April 2013 and apply to all qualifying patents, including historical ones.

R&D Tax Relief

Overview

How is the relief given?

For both regimes, the relief is provided in relation to revenue expenditure that is incurred during an accounting period.  Where a company has eligible activities, certain revenue expenditure will qualify for an additional deduction in calculating taxable profits for that period.  For example, a large company performing eligible work may have £100k of qualifying revenue expenditure in a specific period and, by making a claim for R&D tax relief, will be able to deduct £130k (£125k up to 31 March 2008) in relation to that spend when calculating its taxable profits for that period.  For an SME with £100k qualifying revenue expenditure, the deduction would be £200k (£175k up to 1 April 2011). Furthermore, for an SME which is loss-making, the additional deduction referred to above will serve to increase the company’s losses and this loss generated through the claim can be surrendered for a cash payment of up to 25% of the qualifying R&D spend (note that the cash payment is often referred to as a “tax credit” and is currently capped by the total PAYE and NI the company has paid in the relevant accounting period). In the 2012 budget this cap has been removed, and a new "above the line" regime proposed which will allow loss-making Large Companies to also claim a tax credit - see News.

When should I make a claim?

A claim must be made within two years of the end of the company’s accounting period.  For example, a company with an accounting year end of 31 December 2010 can make a claim at any time up to 31 December 2012.  

What are the key stages in the claim preparation process?

There are three key stages which are the same for both SMEs and large companies:

Determine the scope of eligible activities - which activities meet the criteria set out in the 2004 DTI Guidelines? This process is the same for both the SME and large company regimes and is often where companies underestimate the extent of their eligible work and exclude eligible activities from the scope of the claim, thus reducing the benefit.  It is important that the key technical personnel within the business are involved in this process and Gareth’s background means he can understand the science and technology relating to the business and can help draw the boundary line between eligible and non-eligible activities.

Quantify the claims – which costs should be included in the claim within the tax computation? Although the legislation very carefully sets out the categories of cost that qualify for relief, there are specific rules relating to each of those categories of cost, some of which are particularly difficult to understand if you have no experience of making a claim. The types of cost that qualify for relief differ depending on whether you are claiming under the SME or large company regime and therefore particular care must be taken to ensure that the correct costs are included in the claims.  A claim which includes costs which are not within the scope of the legislation may undermine the entire claim and may cause HMRC to scrutinise all aspects, including the assessment of eligibility. Teresa's experience in quantifying claims means that you can rely on her knowledge and understanding of cost categories and how these are reviewed in practice by HMRC.

Submit the claim to HMRC and deal with any enquiries. HMRC have specialist units to deal with the review of claims for R&D tax relief.  We have to date agreed all claims submitted on behalf of our clients with HMRC with little or no amendment following their enquiries. We understand the nature of the questions they are likely to raise and often provide sufficient detail in our claim support documentation to pre-empt any queries they may have had.

SME Regime

This regime was first introduced in April 2000 and is the most generous.  In order to qualify as an SME, a company must meet certain criteria (which were revised from 1 August 2008):

• Less than 500 employees;
• Turnover of no more than €100m or
• Total balance sheet assets of no more than €86m;
• Must be "independent" (see below)

These limits must be considered in the context of the company itself plus any related enterprises. A partner enterprise is any entity which is related by at least a 25% shareholding, and special rules apply where more than a 50% (controlling) shareholding is involved (linked enterprises). The simplest example is where an apparent SME is a wholly-owned subsidiary of a large group, and so is a large company itself for R&D tax purposes. The rules for aggregating the critical metrics are complicated, with some latitude for certain types of investment organisation - it is not always straightforward to determine the company status. Under certain conditions companies can even be linked through common ownership by individuals.

The SME regime also includes some rules regarding receipt of grants and other funding (including when being paid to do the work by another organisation) and also, for accounting periods ended before 9 December 2009, ownership of the IP resulting from the R&D efforts.  Furthermore, where an SME is precluded from making a claim under the SME regime for a number of reasons it may be able to claim under the less-generous large company scheme - but care must then be taken to ensure that the large company regime rules are applied appropriately.  These rules can be difficult to understand in practice and need careful consideration when preparing a claim.

The SME regime provides for an additional deduction of 100% (125% from 1 April 2012), giving an effective after-tax benefit up to 26% depending on the company’s corporation tax rate.  For a loss-making SME, any losses generated through the R&D claim can be surrendered in exchange for a cash payment (“tax credit”) of up to 25% of the qualifying costs.

Large Company Regime

This regime was first introduced in April 2002 and applies to companies that are not SMEs (as defined above). For large companies, there are no rules relating to the receipt of grants or funding, or in respect of IP ownership.  This regime intends to reward the company actually undertaking the R&D work, not those paying for it.

The large company regime provides for an additional deduction of 30% (25% up to 31 March 2008), giving an effective after-tax benefit of 7.8% for a company paying tax at 26%. For loss-making large companies, there is currently no option to surrender the R&D losses for a cash payment; the additional deduction in this case will only serve to increase the company’s trading loss which can be used in the usual ways under the corporation tax regime - in particular can be carried forward indefinitely. The 2012 budget proposed a new scheme for Large Companies which will allow a tax credit to be paid even if loss-making - this will come into force from 1 April 2013, see News.