In carrying out audit work for a software development company our tax specialists identified grounds for a substantial claim for research and development (R&D) tax relief. By WMT identifying their qualifying status and preparing a claims submission, the company were able to reclaim a substantial sum to reinvest in the growth of the business.
A software development company, whose activities covered general IT consulting and the development of bespoke software systems, had been paying a significant amount of corporation tax to HM Revenue & Customs (HMRC) and was expecting to make a further £600,000. The company had appointed WMT as auditors who identified an opportunity to reduce this bill by making a Research and Development (R&D) tax relief claim.
Our original assignment did not include any corporation tax assurance or consulting services. As part of our audit work, our tax specialists reviewed the draft corporation tax computations prepared by the client.
From initial review there were grounds to believe that a substantial claim for R&D tax relief could be made by the company.
R&D tax relief is a Government initiative which gives enhanced tax relief to companies carrying out qualifying scientific or technological research.
Our key objective was to rigorously assess the client’s activities to maximise the benefits of any valid claim.
WMT met with the company directors to assess which costs would qualify for R&D relief and whether a valid claim could be made.
Once identified, WMT then went about preparing claims for submission to HMRC.
Saving for growth
We identified qualifying R&D expenditure in excess of £9 million, incurred on software development. We revised the submitted 2011 corporation tax return and submitted the 2012 R&D claim enabling the company to reclaim £170,000 of corporation tax.
In addition, the company was not required to make payments on account of £600,000 which would otherwise have been due.
Working closely with the directors we developed a real understanding of the business which enabled us to advise them on how to structure future contracts to maximise the tax relief available.
Overall we estimate that our work for this client has reduced their corporation tax liabilities by at least £1 million. These monies have been used to help the company grow further.