Research & Development Tax Credits
Rewarding innovation and fuelling growth, R&D tax credits have the power to transform your business.
What are R&D tax credits?
Research and development (R&D) tax credits are a government incentive designed to reward UK companies for investing in innovation. They are a valuable source of cash for businesses to invest in accelerating their R&D and ultimately growing.
How do R&D tax credits 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. The scope for identifying R&D is huge – in fact, it exists in every single sector.
Is my business eligible for R&D tax credits?
To benefit from R&D tax credits, you must:
- Be a UK registered Limited Company
- Have carried out qualifying Research & Development activities
- Have spent money on these Research & Development projects
What counts as R&D?
The HMRC R&D criteria are broad. If your company is taking a risk by attempting to ‘resolve scientific or technological uncertainties’ then you may be carrying out qualifying activity. This could include:
- Creating new products, processes or services
- Changing or modifying an existing product, process or service
What costs qualify for R&D tax credits?
When putting together an R&D tax credit claim, the following types of expenditure could qualify:
- Staff costs - salaries, employer’s NIC, pension contributions and reimbursed expenses.
- Subcontractors and freelancers.
- Materials and consumables - heat, light and power that are used up or transformed by the R&D process.
- Certain types of software.
- Payments to the subjects of clinical trials.
What R&D tax credit scheme is right for my business?
SME: Fewer than 500 staff and either not more than €100 million turnover or €86 million gross assets. Most companies, including start-ups, fall into this category.
Large company: 500 staff or more and either more than €100 million turnover or €86 million gross assets.
If you are classed as an SME for R&D tax credit purposes, your next step will be to make a claim via the SME R&D tax credit scheme. And if you are a large company, via the Research and Development Expenditure Credit (RDEC).
| SME R&D tax credit scheme | RDEC | |
|---|---|---|
| SME | Yes | Yes-sometimes |
| Large Company | No | Yes |
How much is an R&D tax credit claim worth?
R&D tax credits are calculated based on your R&D spend. To make an R&D credit calculation, you need to identify qualifying expenditure and enhance it by the relevant rate (see below). This produces your ‘enhanced expenditure’. R&D tax credit rates: SMEs are able to claim up to 33p for every £1 spent on qualifying R&D activities. The average claim made by SMEs in the UK is £53,876 (2016-17). Large companies are able to claim up to 10p for every £1 spent on qualifying R&D activities. The average claim made by large companies in the UK is £272,881 (2016-17). See how much your business could potentially claim below:
| SME R&D tax credit scheme | RDEC | |
|---|---|---|
| A loss-making SME | Up to 33% | 10% |
| A profit-making SME | Up to 26% | 10% |
| Large Company | N/A | 10% |
CONTACT US TODAY to see how much of a Research & Development tax credit we could claim on your behalf. Our dedicated Chartered accountants will be able to guide you and uncover expenditure that could be used in your claim, so that you can re-invest and grow your business.