What are R&D Tax Credits?

R&D tax relief is the government’s way of rewarding businesses that are investing in innovation by developing new, or improving existing products, processes, services, devices and materials or advancing the state of knowledge in their sector.

UK companies are able to claim tax relief for their R&D activity, the scheme was introduced by the Government in 2000 as an incentive to encourage businesses to innovate and is so doing improve their products, services and processes.

Businesses can claim back expenditure spent on projects where they can demonstrate how they are breaking into new ground and have overcome technical or scientific challenges.

Making and R&D Tax Claim

R&D tax relief can be claimed for up to two years from the end of your accounting period. This means that once your business enters a new tax year, you are no longer eligible to claim for any projects that took place more than two years ago.

Research carried out found that although around 800,000 businesses are likely to be eligible for R&D tax relief, just 8% are claiming it!

How R&D Tax Relief Works

In order to qualify for R&D tax relief, the company must account for Corporation Tax, the relief is eligible for both loss-making companies and those making a profit.

Qualifying Costs include:

  • Staff costs – gross pay, employer NIC, employer pension
  • Externally provided workers
  • Subcontractors
  • Materials consumed
  • Software
  • Heating, lighting and water
  • Payments to clinical trial volunteers

Examples of qualifying activities:

  • Software development
  • Automation
  • Failed & successful projects
  • Development of innovative recipes
  • Development of innovative formulas
  • Development of new materials
  • Improved processes
  • Development of new & improved products
  • Development of environmental products

Does my business qualify?

You may be surprised by what is eligible for R&D tax relief – it’s not just for people in white lab coats. Scientific research is eligible, but so are activities such as:

  • Software development
  • Reduction in waste
  • Automation
  • Development of innovative recipes/formulas
  • Development of new materials
  • Improved processes
  • Development of new products

Essentially anything that helps you gain a competitive advantage in a new and innovative way could be eligible for tax relief. The tax laws around R&D tax relief are complicated, and the criteria for eligibility may seem ambiguous. In order to get the largest tax relief return, you need to have an expert on your side. Our R&D partners only do R&D and are one of the best in the business.

There’s no risk attached and the initial assessment will only take around thirty minutes of your time.

Businesses from diverse industries have claimed. Here are some examples of sectors and average claim size as quoted by the HMRC in Sept 2019 for the year 2017-18:

  • Agricultural £42,857
  • Professional, Scientific & Technical £64,236
  • Construction £46,392
  • Accommodation & Food £22,222
  • Manufacturing £43,419
  • Information & Communications Technologies £51,075

Speak to a R&D Specialist today

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