R&D credits available for loss making company.
Our client is a UK-based technology company that develops AI-driven software for the healthcare sector. The company has been trading since 2020 and has made research and development (R&D) tax relief claims under the SME scheme for the accounting periods ending 31 March 2022 and 31 March 2023. The company qualifies as R&D intensive under the enhanced support rules and its accounting period begins on 1 April 2024. For the accounting period ending 31 March 2025, the company incurred the following costs:
- £300,000 on staff salaries directly involved in qualifying R&D activities;
- £50,000 on subcontracted R&D work to a UK-based research institution;
- £20,000 on consumables used in the R&D process;
- £10,000 on rent for office space (not directly related to R&D);
- £15,000 on cloud computing services used exclusively for R&D.
The company is loss-making and intends to surrender the R&D claim for a payable tax credit.
Will the company be eligible to claim R&D tax relief under the merged scheme for the year ending 31 March 2025? And how will the enhanced R&D intensive support affect the payable credit the company may receive?
Readers’ thoughts would be greatly appreciated.
Query 20,531 – Digital Spy.
Tax implications of bringing piece of art back home.
My client, Mr B, is a British national and a high net worth individual. He is a successful insurance broker and has lived in different countries over the course of his career. He has been living in the US for the past five years.
He owns a valuable painting by a well-known British artist, currently held in a private collection in Madrid. Mr B plans to import the painting into the UK to sell it at a prestigious London auction house. The painting is valued at £2m.
Mr B is not VAT-registered in the UK and has no other UK business interests. He intends to sell the painting personally, not through a company. The auction house will charge a commission on the sale.
My questions are, what are the UK tax implications of importing the painting into the UK? Are there any VAT or customs duties that may apply? Would VAT be due on the sale? Would he be liable to UK CGT, considering his non-resident status? Are there any planning opportunities or compliance steps that Mr B should consider before going ahead with his plan?
Readers’ thoughts will be welcomed.
Query 20,532 – Caravaggio.
Does the new temporary repatriation facility apply?
My client has a small overseas portfolio/deposit of around £100,000 but it has a chequered history. Original funds would have been non-taxable foreign earnings when the client was resident and working overseas. Subsequently for some years after UK residence resumed, the client did not specifically claim the remittance basis but I believe it has actually applied for some years as the annual income was under £2,000. The client has in recent years been deemed domiciled due to several years of residence, and income has been included on annual tax returns.
It seems to be a mixed fund which would normally involve HMRC attempting to tax any remittances to the UK. Unfortunately, there is no documentation over the many years to enable us to make an accurate analysis. The new temporary repatriation facility could limit remittances to a 12% tax charge. Do readers agree my assumption is correct – that this is the only way to have definitive treatment and that it would be charged on the whole £100,000?
Query 20,533 – Puzzled.
Will overseas sales create a UK registration problem?
I have two separate clients whose turnover is approaching the £90,000 registration threshold for VAT and both want to avoid registering if possible.
By coincidence, both clients have won lucrative contracts to supply services to business customers based in the Netherlands. The first client is a surveyor and his fees are to provide accurate valuations on properties owned by the Dutch company in the UK. The properties are both residential and commercial if that is relevant. The other client will provide travel consultancy services to a Dutch travel business, suggesting possible UK tours and trips in the future.
My understanding is that both contracts can be ignored as far as the £90,000 registration threshold is concerned because the Dutch customers will do the reverse charge on their own VAT return. Is this correct? One of my colleagues said that this will only be the case if my clients are registered for UK VAT, ie transferring any potential UK VAT charge to the Netherlands. My view is that this is wrong but what do readers think?
Query 20,534 – Manchester Matt.
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