Readers’ forum: R&D problem

For some years my client operated through a personal service company and worked on a research and development (R&D) project. So far this has been funded by his contractor income and he has claimed the 130% tax relief (as well as the normal tax deduction). Unfortunately the extension of the off-payroll rules has meant that the company he has been working for has put him on a personal employment contract. He is now funding the research through his taxed income and is building up a large credit balance on his director’s loan account.

I believe he will be able to claim the 14.5% R&D tax credit in the company but this still leaves him with a large unrecoverable tax cost and the relief is much less than the 130% deduction would allow. Ultimately in five to ten years he is hoping that the royalty...