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Created May 29, 2014 19:00
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R&D Tax Credits
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gistfile1.txt
Here is a hypothetical example I don't know if this is legal and correct but this is my idea.
Sam Systems Ltd. earns £10k from consulting work for Acme Mega Corp.
As SS is VAT registered on the flat rate scheme eh invoices 12K and pays £1680 of that to HMRC as VAT
He then takes the remaining £10320 and invests that in R&D of a prototype new product as follows:
He spends 2 months of his time building a back end system paying himself a minimal salary of £663/month
He spends 6k with Andys Apps Ltd to develop an iOS client for the system
He Spends 4k with Daves Designs Ltd to design and create the UI for the app and web pages to support the service.
The question now is how much tax credit can Sam Systems Ltd claim from HMRC, what is the remaining profit left in Sam Systems that can be paid as as a dividend to its shareholders, and what is the corporation tax liability at the end of the year for Sam systems.
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