Research & Development Tax Credits
The Inland Revenue advise that the R&D tax credit will not be available to claimants in their 2009/2010 income year. Labour's 2011 Election year policy is to provide a 12.5% tax credit to firms conducting research & development. The 15% R&D Tax Credit was in place when Labour was in government but was withdrawn by the National government in late 2008.
Description of the Previous Scheme
The 15% tax credit is intended to encourage New Zealand businesses to invest more in R&D and to innovate and develop improved products and processes. This is expected to have wider benefits for the New Zealand economy and boost productivity and international competitiveness.
Notice of Proposed Adjustment (NOPA)
The R&D Tax Credits can still be claimed for the 2008-2009 income tax year if you file under a Notice of Proposed Adjustment (NOPA). You must submit an NOPA to request that your income tax return be reassessed to include your claim for an R&D tax credit.
R&D Detailed Supporting Statement
To claim your R&D tax credit you must file both an income tax return for the year the credit relates to and a detailed supporting statement. The detailed supporting statement describes the R&D activities undertaken and the expenditure incurred. The detailed supporting statement must be prepared and declared online and filed no later than 30 days after the due date for the income tax return.
If you or your tax agent, do not have an online account with the IRD you must create one. Go to the IRD's Online Services Registration at http://www.ird.govt.nz/online-services/online-services-registration.html
Applied Support Services are experienced at preparing R&D tax credit claims and if you would like assistance please contact us.
Who can get the R&D tax credit
New Zealand businesses undertaking R&D on their own account or outsourcing R&D will be eligible. Businesses will have to incur at least $20,000 of eligible expenditure in the year a claim is made unless the R&D is outsourced to a listed research provider. Businesses will be eligible, regardless of their legal structure, if the R&D is carried out predominantly in New Zealand.
The credit will be 15% of the claimant’s total eligible expenditure for the year. Non-deductible expenditure such as GST input tax, capital expenditure on land, or on non-depreciable intangible property will not be eligible. R&D credits will be paid out in cash to loss making businesses such as start-ups.
The R&D must relate to your business, or to an intended business in New Zealand and it must be carried out “on your behalf”. Records demonstrating the claimant’s control over the R&D activities will be required to show that you will:
• Control the research and development activities.
• Bear the financial risk of the R&D activities.
• Effectively own the results of the research and development activity, if any.
R&D Tax Credit Plans and Reporting Systems
Applied Support Services will help you with the preparation of your R&D Tax Credit Plans, R&D budgets and R&D tax credit reporting systems.
The Planning Process Covers
• Defining your SIE R&D activities.
• Defining your Supporting R&D activities.
• Providing state of knowledge evidence for SIE activities.
• Liaison with your tax advisors.
• Liaison with your cost accounting systems advisors.
• Preparation of your R&D Plans and Reports.
Research and development projects subject to a tax credit claim will require claimants to demonstrate that the R&D process followed a planned, logical progression of work involving hypothesis, experiment, observation and evaluation. R&D projects subject to a tax credit claim will require claimants to demonstrate the plan was prepared prior to the research commencing.
The planning process involves creating your R&D project plans, budgets, reporting and record keeping systems. You will be provided with systems to keep records including, for example, non-accounting documents such as project plans or test-reports to provide evidence of a scientific, investigative and experimental (SIE) approach to an activity.
You will be provided with systems to record eligible expenditures including employee salaries; the costs of entities or persons conducting R&D on your behalf, asset depreciation, staff training and travel, prototype materials, overheads, and consumables.
R&D tax credit plan templates customised to your needs will be supplied in Microsoft Word format and essential tables in Microsoft Excel format. The templates are straightforward and easy to understand. The templates include generic manual reporting systems for claimants who do not have computer based job costing systems. You will be provided with files and folders in which to store your R&D tax credit records. These files and folders will enable you to store and save the following records:
• Eligible business test records.
• “On behalf of” test records.
• Records showing eligible R&D activities.
• Records showing eligible expenditure.
Staff Training
Once your R&D plan is in place we can provide your staff with ongoing training in R&D project reporting and R&D project record keeping. The training includes:
• Setting-up and managing staff time sheets.
• Setting-up files and folders for your projects on your computer system.
• R&D project reporting.
• R&D project record keeping.
Our Experience
Applied Support Services has 15 years experience assisting companies plan and apply for research and development funding. For six years Applied Support Services was a Crown Agent for the Foundation for Research Science and Technology, where we planned and managed approved grants for private sector research and development (GPSRD) in Auckland and Districts.
Applied Support Services Limited's Research and Development Tax Credit Disclaimer
Applied Support Services Limited provides professional advice on preparing Research and Development (R&D) plans, budgets, implementation schedules and project monitoring and control. Applied Support Services Limited provides advice on establishing evidence that R&D activities meet the IRD’s criteria for systematic, investigative and experimental activities, (SIE). Applied Support Services Limited does not provide professional advice on tax or accounting matters as such. For advice on tax and accounting matters please consult with the Inland Revenue Department, an accountant or qualified financial advisor. Claimants are advised that sections of the “Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters Bill” will remain in public consultation, or are still subject to the decision of the Commissioner, and may remain so until 2010. Dated January 2008.
This page was last updated on 31 May 2011
Website by On Company. Admin