R&D Tax Credits
Unlock the funding potential in your innovation
What are R&D tax credits?
R&D tax has been around since 2000, and is designed to reward businesses looking to push the boundaries and create new innovate products, develop bespoke methodologies to solve problems or even replicate a competitors existing products or processes.
The regime can provide most businesses with a return of up to 33p for every £1 spent on R&D, with a lower benefit of up to 11p for every £1 spent by very large businesses or smaller ones receiving grants or subsidies.
The regime is a key part of the governments industrial strategy, and this has been reflected over the past few years with the regimes becoming more and more generous with each Budget.
How does R&D relief work?
If you are undertaking R&D then the costs associated to the project are calculated by apportioning them, uplifting them and incorporated into your corporation tax return. This uplift can either reduce your tax bill or generate a cash credit by surrendering your losses.
Working with a specialist, after assessing your qualifying projects we would then look at what associated costs were incurred on the qualifying activities. The costs that you can claim are:
- Staff costs: including salaries, employers NI and pension contributions & any bonus or commissions paid.
- Consumables: any materials used during the R&D process that are no longer useable afterwards eg ingredients during developing new recipes. This also includes utilities.
- Software: any specialist software licences used that was integral to the R&D process.
- Externally Provider Workers/Subcontractors: Two similar categories that effectively cover the use of outside labour, whether specialist services/expertise or man power needed to complete the project.
Am I eligible?
If your business is following industry standard processes and not developing anything new or unique then probably not.
However, as the regime applies to all sectors working in a field of science or technology (apart from the arts, humanities and social sciences), if you are creating new products, processes or services the chances are your industry will qualify even if you don’t so.
If your business is in the Manufacturing, Construction, Software, Food & Drink or Medical then it’s definitely worth exploring your eligibility.
What's Next?
Depending on the size of the claim, and the time available, the preparation process can be completed within one or two weeks, with HMRC taking about a month to process claims.
Arrange a preliminary call/zoom to discuss your business and assess your eligibility and agree terms.
- Arrange an in depth meeting to help you fully understand the R&D tax regime and what activities qualify and to go through the finer details of the R&D activity that has been undertaken.
- Provide relevant costs and apportion them to the qualifying activities.
- The report is prepared with a final call to answer any final questions.
- Report submission and amended tax comps filed (if necessary) to HMRC.
Your claim will be prepared by a Chartered Tax Advisor who has been a member of HMRC’s R&D Consultative Committee for many years. The process is designed to work with your accountant and not replace them and includes amending tax computations and dealing with any enquiry in the event there is one.
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