The Research and Development (R&D) reliefs was introduced by the UK government in 2000.
Its aim is to support companies that work on innovative projects in science and technology. It can be claimed by a range of companies that seek to research or develop an advance in their field.
You may be able to claim Corporation Tax relief if your project meets HMRC definition of R&D.
The tax relief is a valuable source of cash for businesses to invest in accelerating their R&D, hiring new staff and ultimately overall growth for the business.
How do R&D tax reliefs work?
Companies that spend money developing new products, processes or services; or enhancing existing ones, are eligible for R&D tax relief. If you’re spending money on your innovation, you can make an R&D tax credit claim to receive either a cash payment and/or Corporation Tax reduction. The scope for identifying R&D is huge – in fact, it exists in every single sector.
if you’re making a claim for the first time, you can typically claim R&D tax relief for your last two completed accounting periods.
What costs may qualify for R&D tax credits?
- Staff Costs, including salaries, employer’s NIC, pension costs and staff reimbursed expenses.
- Subcontractors costs and freelancers costs.
- Materials and consumables including heat, light and power that used by the R&D process.
- IT or software investments for the R&D process.
- Costs for clinical trials.
How far back can R&D tax relief be claimed?
If you’re making a claim for the first time, you can typically claim R&D tax relief for your last two completed accounting periods.
What R&D tax relief scheme is right for you?
What scheme will largely depend on if you are an SME or a large company.
SME:
Less than 500 staff;
not more than €100 m turnover or €86 m Gross Assets.
Large company:
More than 500 staff;
either more than €100 m turnover or €86 m Gross Assets.
A large company normally uses Research and Development Expenditure Credit (RDEC).
A SME will make a claim via the SME R&D tax credit scheme.
Sometimes, a business needs to use combined schemes to claim R&D tax reliefs.
Important facts on R&D tax relief
- It can be claimed on unsuccessful projects.
- They are different schemes, choose a right one for the business.
- SMEs are able to claim up to 33p for every £1 spent on qualifying R&D activities.
- Large companies are able to claim up to 10p for every £1 spent on qualifying R&D activities.
If you think you have R&D expenditures in the business, and they might be eligible for tax relief.
Please come to discuss with us. One thing is certain: the tax relief is a valuable source of cash for businesses to invest in accelerating their R&D, hiring new staff and ultimately overall growth for the business.