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Keeping pace with the global economy is an artform in itself, but it is clear that international businesses still value the UK as a location for R&D.
Where a business is conducting R&D in the UK, it is important that only eligible and qualifying operations are considered for R&D tax relief claims.
What does an international company need to do to claim R&D tax relief in the UK?
As is apparent from the concerted effort to improve the quality of R&D tax relief claim submissions, HMRC is keen to ensure that only qualifying R&D work is awarded funds.
This means that international businesses cannot make an R&D tax relief claim without having a notable presence in the UK.
Rather than just being a shell company for a wider entity, the company needs to have a legitimate presence in the UK.
It should be conducting business here and be within the charge of Corporation Tax (CT), given that CT determines the nature of funds awarded following a successful claim.
From that point, the UK business will be able to apply for an R&D tax relief claim in the same fashion as any other business.
The extent to which the claim will be worthwhile will centre primarily on how much R&D work is conducted in the UK.
International companies are more likely to be conducting work across multiple territories as they may have specialists all over the world.
Where there were previous considerations for overseas R&D, the rules were recently tightened to ensure that the UK would benefit more by limiting eligible R&D to work conducted in the UK.
The only exception to this is when the nature of the R&D means that it is not possible to conduct it in the UK.
A well-known example of this would be if the R&D required some specific geological conditions, like a desert, that are simply not present in the UK.
Where R&D work is connected across territories, only the work in the UK can be considered eligible.
This means that costs will need to be correctly calculated, which should not be immensely challenging, as they will be the costs reported as part of the UK business’s annual filings.
How can international businesses be supported when making R&D tax relief claims?
When dealing with international businesses, there is a heightened chance that misunderstandings of the UK tax rules may arise.
This is especially true for the notoriously complex rules of R&D tax relief, where even well-seasoned businesses and accountants can struggle to untangle the guidelines.
However, the main people in charge of the R&D will be operating a UK business, so they should be open to understanding how the system functions.
Still, it may benefit international businesses to understand the range of qualifying costs that can be included in an R&D tax relief claim.
This might encourage more businesses to operate in the UK to drive innovation in the country if they perceive R&D tax relief claims to be advantageous.
As R&D tax consultants, we want to extol the virtues of the UK’s R&D tax relief claims to diversify the scope of innovation that takes place in the UK.
That is why we want to support businesses and accountants, whether they are filing their first R&D tax relief claim or are hardened veterans.
To unlock the full potential of R&D tax relief claims in the UK, speak to our team today!
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