R&D Tax Credits
What are Research & Development Tax Credits?
R&D Tax Credits are a tax relief designed to encourage companies to invest more in innovation. They reward companies with a cash credit or corporation tax deduction by allowing them to recover their eligible research and development costs.
The UK scheme is one of the most effective and generous tax incentives in the world with companies being able to claim back up to 33.35% of their R&D costs.
What Work is Eligible for R&D Tax Credits?
In order to claim R&D Tax Credits companies must be researching or developing new products, processes, materials, devices or services, or be working to improve existing ones. The R&D work carried out must be relevant to the company’s trade.
Eligible R&D projects are those in which a competent professional in the field attempts to achieve an advance in science or technology through the resolution of technological uncertainty.
The success of a project does not determine whether or not it is eligible for R&D Tax Credits.
Who Can Claim R&D Tax Credits?
The R&D tax relief programme has two distinct schemes, one for small or medium sized enterprises (SMEs) and another, known as RDEC (Research & Development Expenditure Credit) for large companies.
Grants or subsidies can affect what a company is entitled to claim and where these do not allow SMEs to claim under the SME scheme, they will be able to claim for eligible expenditure under the RDEC scheme. SMEs may also claim under the RDEC scheme if they are carrying out subcontract R&D for a large company.
Only companies that are subject to UK corporation tax can benefit from the schemes, however, this does not exclude those that are loss making or mean that the R&D has to have been performed in the UK. There are no restrictions on which industry sectors can apply.
A company is classed as an SME for R&D tax purposes if it has fewer than 500 employees (company or group) and a turnover below €100 million or gross assets of less than €86 million.
A company isn’t classified an SME if it is part of a larger enterprise that when taken as a whole would fail the above test.
A company (or group) is regarded as a Large Company if it exceeds the SME thresholds.
What is an R&D Tax Credits Claim Worth?
Profitable companies receive tax relief of £250 for every £1,000 spent on eligible R&D
Loss Making companies receive a cash payment of £330 for every £1,000 spent on eligible R&D
Profitable and Loss Making Companies receive £110 cash credit for every £1,000 spent on eligible R&D
Eligible R&D Expenditure
There is a wide range of qualifying expenditure applicable to a claim for R&D tax relief including but not limited to:
- employee costs
- materials consumed or transformed
- payments to clinical trials volunteers
- specially commissioned parts for prototypes
- software bought for R&D work
- sub-contractor costs
- proportion of variable overheads
Retrospective R&D Tax Credit Claims
Whether you’re profitable or loss-making, it’s also possible to retrospectively claim for R&D projects undertaken during your previous two accounting periods.
How to make a Claim for R&D Tax Credits
In order to claim R&D tax relief you first need to identify which of your projects and activities meet HMRC’s qualifying criteria. For those activities which meet the criteria you need to calculate your eligible expenditure and once you have this figure you will be able to calculate your enhanced expenditure.
It is the R&D enhanced expenditure figure which you need to enter into the full Company Tax Return form (CT600). You then need to provide supporting evidence for your claim. In doing this you need to explain how each project:
- looked for an advance in science and technology
- had to overcome uncertainty
- tried to overcome this uncertainty
- couldn’t be easily worked out by a professional in the field
Companies can choose to submit a claim themselves, outsource it to their accountant, or employ the services of a specialist third party such as R&D Funding Group.
The key to maximising a claim is in the identification and justification of qualifying costs and activities and this is where a specialist can really make a significant difference to the amount of tax relief you are able to obtain.
Why Use R&D Funding Group to Handle your Claim?
Adding significant value
Preparing and submitting a claim for R&D tax incentives can be complex and time-consuming, particularly for those who are unfamiliar with the process. Seeking specialist professional advice can add significant value to any potential claim, and this is particularly pertinent if you are considering other tax incentives or grant funding as this can negatively impact on your claim value if not managed correctly.
With our specialist knowledge and experience of putting together R&D claims, we can take ownership of the process for you. We can determine precisely what you can claim and how much; thus ensuring your claim is maximised. We write technical reports that provide sound supporting evidence and that R&D tax inspectors will approve.
Qualified & experienced
We have an outstanding relationship with HMRC and will fully defend your claim in the unlikely event there is a query with it. One of our Directors sits on the HMRC R&D Tax Credit Advisory Panel and every member of our team has between 10-15 years’ specialist experience handling R&D Tax Relief claims, backed by formal qualifications and industry experience.
Your claim will be handled by our Industry Specialist Technical Consultants and R&D Tax Specialists
We require just two to three hours of your time at the start of the process to gather all the relevant information, allowing you and your staff to then focus on your core business.
In brief summary we will:
- identify all of your R&D projects, activities and costs
- write up your technical report
- prepare your costing schedule
- work in conjunction with your Accountants to file the claim
- ensure HMRC handles your claim quickly
- deal with any queries raised by HMRC and fully defend your claim to ensure it’s accepted
- handle your R&D claim from start to finish
Saving You Time and Money
As experience has proven we are able to maximise claims by significant sums compared to those prepared in-house or by Accountants, our service not only saves you time but provides you with a higher return.
All of our R&D Tax Credit claim work is carried out on a contingency basis so you only pay us a fee on receipt of your successful claim (a percentage of the corporation tax saving). There are no hidden costs or charges so there is no risk to you in engaging our services. In the unlikely event your claim is unsuccessful you will pay us nothing and the work done by us in preparing and submitting your claim will be free of charge.