In the recent budget the chancellor announced a relaxation of some of the rules for claiming additional relief for expenditure on research and development which hopefully will now bring this relief within the scope of more companies who incur this type of expenditure.

The new rules apply to expenditure incurred after 1st April 2011 and will only apply to companies. The additional deduction now given for qualifying expenditure is increased to 100%.

This means that for every £100 spent on Research & Development, the total deduction for corporation tax purposes will be £200.

Previously it was necessary to incur expenditure of £10,000 in qualifying expenditure. This restriction has now been removed. In addition the limitation on the surrender of any losses arising from the claim to obtain a refund of PAYE & NI has also been removed and any repayment will no longer be limited to the amount of PAYE & NI paid.

In the light of these changes does any of your own expenditure qualify? There have been no changes in the basic rules on the nature of the expenditure and the type of research being undertaken.

For the expenditure to qualify it must be incurred on consumable stores (including computer software) and direct wages. Subcontract R & D can qualify but certain conditions need to be satisfied. In addition the expenditure must not be subsidized.

For there to be R&D for the purpose of the tax relief, a company must be carrying on a project that seeks an advance in science or technology. It is necessary to be able to state what the intended advance is, and to show how, through the resolution of scientific or technological uncertainty, the project seeks to achieve this.

Space prevents a fuller description of what qualifies as a research & development project but further details can be found on the website at H M R & C on http://www.hmrc.gov.uk/manuals/cirdmanual/CIRD81900.htm

If you wish to discuss this matter please contact Gary.

For the majority of businessmen the use of a motor vehicle is an important business tool and whilst the actual running costs are a major consideration in the decision over the vehicle to use, the associated taxation of those costs can vary dependent on the vehicle being used.

The Chancellor's surprise fuel duty reduction in the March Budget looks good news when viewed alongside the cancellation of the fuel duty escalator. However, high oil prices and increase in VAT in January, there is plenty to consider when it comes to the cost of business transportation.

The majority of commercial vehicles benefit from the Annual Investment Allowance (AIA) which provides 100% first-year relief on up to £100,000 spent on plant and machinery (although this limit is being reduced to £25,000 with effect from April 2012. Cars however, do not qualify but, along with other purchases over the AIA threshold benefit from the Write Down Allowance (WDA), currently at 20% (but capped at 10% for cars which emit over 160 grams of CO2 per kilometre).

Vehicles used exclusively for business do not impose a personal tax on the user. If the vehicle is used privately, the employer must pay VAT on the purchase price and the employee pays tax for the ability to use the vehicle privately. VAT on repairs and maintenance can be reclaimed but employers must pay Class 1A National Insurance on motor vehicle and fuel benefits provided to employees.

There are tax concessions on maintenance and running costs, interest on bank loans used to buy a vehicle and rental payments for leased vehicles, while 15% is taxed for cars which emit over 160g/km of CO2. Purchasing low-emission cars (under 110g/km) offers a 100% write-off against tax.

Vehicle excise duty is also a consideration – there is a different rate for the first year after purchase (higher for cars over 130g/km, zero under this), aligning with standard rates from the second year on.

As you can see there are a considerable number of factors to consider but we are able to guide you through this maze to make the most efficient decision on the use of motor vehicles and can also highlight a number of less heavily taxed vehicles and whilst these vehicles may not be to everyone's taste there is a surprising range of vehicles which do benefit from lower personal and corporate taxation.

There has been much debate in the press following the changes announced in the benefits system including changes in tax credits.

If you have not previously been entitled to tax credits the start of the tax year is the time to give consideration to whether or not a claim should be made. A claim can put money directly into your pocket and should therefore be considered if you anticipate a reduction in household income over the forthcoming year.

If you anticipate your household income to be below £15,860 in the forthcoming tax year you may be entitled to tax credits and a claim should be made now. If you have children, the upper limit beyond which no credits become payable has been reduced to £40,000.

As the credits are payable during a tax year and are based on a previous years income any increase in income could result in a clawback of credits. To avoid any hardship this may entail an income increase disregard used and this disregard has now been reduced from £25,000 to £10,000, which is still a quite generous disregard for those on fluctuating incomes.

Should you wish to consider whether such a claim is relevant please contact Steve or Gary