Many countries give favorable tax treatment for expenditure in research and development. The South African government provides 150% of the qualifying expenditure, so there is potential for Africa New Energies to use this in conjunction with government grants and to partner with South African Venture Capital companies. Unfortunately, Namibia does not have a tax credit regime.
UK rules are globally unique in that they permit:
- research and development to be performed outside UK
- Intellectual Property to be owned by a non-UK entity
- Universities around to world to claim full deduction
For example: If one were to spend £100k on qualifying R&D, you would receive 230% super-deduction in Small & Medium Sized Business which do not even have to be that small. Meaning that the company must have a turnover less than EUR86 million, a gross value on the balance sheets of less than EUR100 million and less than 500 employees.
This super deduction reduces taxable income by £230k and, considering that the tax rate is 20% in UK, this deduction is worth 46% or £46,000. Furthermore, one can sell back loss to HMRC at 14.5% which means that a loss-making company can benefit and is how ANE has received £170k in the last 12 months.
The government encourages this because they have found that every pound invested in research and development results in a £17 increase in revenue, as IP rich products are more competitive.