By Max Clarke

Leading providers of accountancy and tax advice services, Menzies LLP, have today released their fortnightly tax updates bulletin, in which developments to the tax system are discussed.

Three issues raised in the report, written by Tax partner Richard Goodman, include: the research and development tax credits for SMEs outlined in the budget; the increase in fees for online tax payment; and the energy-saving enhanced capital allowance scheme.

Research and development tax credits for SMEs.

The rate of the additional deduction for expenditure on research and development (R&D) for companies that are small or medium sized enterprises (SMEs) is increase from 75% to 100% from 1 April 2011, giving a total deduction of 200%. It is then proposed to increase this to 225% from 1 April 2012. Other changes are being consulted on, such as abolishing the minimum expenditure condition of £10,000, and the rule limiting a company’s payable R&D tax credit to the amount of PAYE and NIC it pays.

“This will make R&D relief very attractive for SMEs. It is one of the few tax breaks still available and the question now is what expenditure qualifies? There is a misconception that only work undertaken by scientists in white lab coats will qualify, but this is not the case. To qualify the work should be done in order to resolve scientific or technological uncertainty.”

“Sometimes the hardest part is explaining the technical issues to HMRC, and then convincing them that the expenditure qualifies. Fortunately, R&D claims are dealt with by specialist units at HMRC, but just because the relief is part of government policy to promote the technological economy, don’t expect HMRC to part with the money easily. It is important that claims should be presented in an appropriate format to expedite the claim process.”

Increase in fee for paying your tax online

From 1 April 2011, the fee that will be charged by HMRC where payment of taxes by credit card is authorised via the Internet, will increase from 1.25% to 1.4% of the amount of the payment. The increase reflects the overall costs incurred by HMRC for handling such payments. “When this was introduced in 2008 the fee was 0.91%, we have seen an increase of 54%. It seems that whichever way you turn the long suffering tax payer takes a hit”.

Dyson Airblade Hand Dryer

The energy-saving enhanced capital allowance scheme will be updated during summer 2011, which allows 100% tax relief for the cost of equipment. The main change includes the addition of the new technology-efficient hand dryers, such as the Dyson Airblade. “Almost certainly not related with Sir James Dyson’s Ingenious Britain report, which sets out recommendations on innovation and technology for the Government.”