What Increased Audit Scrutiny Means for your UK R&D Tax Claims

Written by Corporate Tax Incentives. Updated Feb 7, 2022.

Research & Development (R&D) Tax Relief Incentives in the UK have been in place for over 22 years, which is comparatively young against jurisdictions such as the US and Canada, which have had their R&D credits in place for over 40 years. In the most recent of years Her Majesty’s Revenue and Customs (HMRC), the UK’s administrating agency, has taken significant steps to improve the scrutiny of R&D tax relief claims made by Small and Medium-Sized Enterprises (SMEs) and Large Companies to ensure the uptake remains genuine.

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Cash Grants for Collaborative R&D between the UK and Singapore

Written by Corporate Tax Incentives. Updated Jan 27, 2022.

As a part of its initiative to further international collaborative research, Innovate UK has announced that it will invest up to £3 million in innovation projects in partnership with Enterprise Singapore. The aim is to fund business-led industrial research. Proposals must include at least one small or medium-sized (SME) partner from the UK and one partner from Singapore. Large UK companies are allowed to apply but must involve at least one SME. These partners should be separate legal and non-linked entities to ensure genuine international collaboration. The UK partners will be awarded up to £350,000 from Innovate UK while Enterprise Singapore will fund the partners from Singapore.

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New Filing Requirements for R&D Credit Spark Controversy

Written by Corporate Tax Incentives. Updated Oct 28, 2021.

For most tax return preparers, the end of the day on October 15th marks a joyous occasion—the end of a frequently grueling tax filing season and a much-needed reprieve before the cycle begins again in January. Unfortunately, the Service cut the party short in the world of R&D tax credits with its issuance of a new memorandum. This memorandum, published by the Internal Revenue Service Office of Chief Counsel on October 15th, issued new guidance regarding what required information a taxpayer must now include in its claim for an R&D tax credit.

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Es ist nicht zu spät – Euros Available in Germany for Research

Written by Corporate Tax Incentives. Updated Sep 24, 2021.

It’s not too late to take advantage of Germany’s new research and development (R&D) tax credit. This credit was introduced in January 2020 and is worth up to EUR 1 million per tax year. The best part?  If the credit exceeds your tax liability, the excess is fully refundable. This means that the German government will refund all or a portion of the credit back to you in cash. The German authorities are giving taxpayers four years to file their R&D claims. So, even if you have already filed your 2020 tax return, or do not have time this year to get started on it, you can still benefit through 2024. It’s not too late, but don’t wait too long to file!

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Little Sandy Coal Company v. Commissioner—Another Lesson on the Importance of Substantiation

Written by Corporate Tax Incentives. Updated Apr 2, 2021.

On February 11, 2021, the tax court issued a new memorandum opinion in Little Sandy Coal Company v. Commissioner. In this case, the taxpayer—a shipbuilding subsidiary—was denied its claimed R&D credit based on the development of 11 vessels by the IRS. After receiving its notice of deficiency, the taxpayer brought suit in the tax court seeking a redetermination. For the sake of expediency, the parties agreed to limit review to just 4 of the 11 projects at issue; the court’s opinion addressed only two of these—the Apex Tanker and Dry Dock Projects.

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Tangel v. Commissioner—Works for Ire

Written by Corporate Tax Incentives. Updated Jan 29, 2021.

On January 11, 2021, the tax court issued a new opinion concerning the application of the Federal Credit For Increasing Research Activities. In Tangel v. Commissioner, the taxpayer—a designer and manufacturer of integrated controls and switchgears utilized in power generation—was denied its claimed R&D credit by the IRS. After receiving its notice of deficiency, the taxpayer brought suit in the tax court seeking a redetermination. For procedural reasons, the court limited its opinion and ruling to a single project performed under contract by the taxpayer. The Service argued that the research performed by the taxpayer under this third-party contract was “funded” as defined under section 41 of the code. Specifically, the government contended that under the contract, the taxpayer retained no substantial rights in the results of the research.

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COVID-19 Relief Bill Provides Favorable Changes to the Employee Retention Credit

Written by Ian Merwin, J.D.. Updated Jan 12, 2021.

Signed into law on December 27, 2020, the Covid-19 relief bill contains a favorable update to the Employee Retention Credit (“ERC”). The Employee Retention Credit was one of the more successful components of the CARES Act, but there are several significant updates to the credit that are even more favorable for qualified businesses. Several updates can be seen below, along with a comparison to the credit terms under the CARES Act. Unless stated otherwise, the effective date of the provisions covered by the new law will be January 1, 2021.

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PPP Loan Forgiveness and the R&D Tax Credit

Written by Corporate Tax Incentives. Updated Dec 28, 2020.

Updated Dec 28, 2020

Officially signed into law on December 27th, the recent omnibus Covid-19 relief bill H.R. 133 reversed the Service’s previous stance regarding the deductibility of PPP-related expenditures. Among the bill’s voluminous provisions, section 276 (beginning on page 2004) makes clear that no deduction shall be denied as a result of a PPP loan’s forgiveness. Consequently, a taxpayer’s potential federal research credit will be unaffected as a result of the taxpayer’s utilization of a PPP loan and subsequent loan forgiveness. This protection is extended both to loans under the original Paycheck Protection Program as well as future loans to be granted under the bill’s expanded program.

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Strapped for Cash; Companies Look to California ETP for Relief!

Written by Annette Fago, CEcD. Updated Oct 23, 2020.

As the country continues to grind through the COVID-19 pandemic, states have been looking for ways to help businesses impacted by the unprecedented economic downturn. In addition to the incentives offered by the Federal government, several states have acted on their own either by authorizing new, COVID specific incentives, amending existing programs or by working within the confines of the existing rules and regulations of some programs.

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Populous Holdings—A Popular Holding for R&D Taxpayers

Written by Corporate Tax Incentives. Updated Oct 6, 2020.

Populous Holdings, Inc. v. Commissioner marks a highly favorable case decision for taxpayers claiming the research and development tax credit in general, and for the architecture industry in particular. In Populous Holdings, the court granted summary judgment in favor of the architectural design services taxpayer, holding that all five representative contracts at issue in the case were unfunded and therefore eligible for inclusion in calculating the tax credit.

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