As part of the Government’s “Business Growth Agenda”, legislation has been implemented to ensure the tax system does not discourage R&D. Tax relief is proposed for R&D intensive and loss making start-up companies.

Loss making companies will be able to "cash out" all of their tax losses from R&D. Claimants will have to have spent at least 20% of wages and salaries on qualifying R&D activities and be in a tax loss position for the relevant tax year. The new policy is expected to be passed by November 2015 and to take effect from April 2015. Claimants will need to get systems in place to capture eligible expenditure back to April 2015.

Loss making companies will be able to “cash out" all tax losses from their R&D spending. The scheme is mainly targeted at loss making start-up companies. This measure means R&D intensive companies will have "early access to all or part of their tax losses in the form of a cash receipt, rather than carrying those losses forward”. Officials propose eligible R&D companies would be able to cash out the lesser of:

  • 1.5 times the company’s R&D expenditure on salaries and wages;
  • Total losses; or
  • Total qualifying R&D expenditure;

The cap on eligible losses for the relevant year will initially be 28% of $500,000 of losses, rising overtime to 28% of $2 million of losses.

Businesses will have to prepare a statement of R&D activity and expenditure. This will include detail and evidence that shows activity and expenditure meets the accounting definition of R&D. Claims will be screened to discourage fraudulent claims. Enough detail will need to be provided to allow checks to take place. To learn more, visit this page.

This scheme bears similarities to the R&D Tax Credits. When that scheme was operating, Applied Support Services helped many companies plan, file and receive their R&D Tax Credits. For help preparing your statement of R&D activity, determining your qualifying R&D expenditure and calculating your tax loss claims, contact us on (09) 817 7460 or send us an email.

This article was written by Applied Support Services. For more information check out their website.