The R&D Tax Credit scheme was first introduced by the government in 2000 to recognise and encourage innovation in business. Since then it’s developed to become a vital lifeline for many companies in the UK, offering either a reduction in corporation tax or a cash payment.
Limited companies in any industry may be eligible to claim research and development tax relief for innovative science and technology projects they undertake, so are you eligible for R&D tax relief and how do you make a claim?
How do I make an R&D Tax Claim?
There are two research and development schemes in operation in the UK:
If you’re a larger company you can claim through the Research and Development Expenditure Credit Scheme, and receive a deduction in corporation tax for the amount of qualifying expenditure you claim.
If you have no corporation tax to pay you could receive a cash payment, or alternatively, a tax credit in relation to other taxes/duties owed by your company. Some smaller companies that subcontract their research and development activities, or that receive grants, subsidies, or state aid, can also claim through RDEC.
The tax relief rate on this scheme is 13% of qualifying R&D expenditure (from 1st April 2020).
SMEs are identified as companies with fewer than 500 members of staff, and either an annual turnover of less than €100 million or a balance sheet total of less than €86 million. You can deduct 130% of qualifying R&D costs from your annual profits, in addition to the usual 100% deduction.
If you’ve made a loss you can claim a tax credit equivalent to up to 14.5% of your surrenderable loss. It’s also possible to backdate a claim for R&D tax relief two accounting years.
Claiming back R&D is complicated, but you can get free independent advice from an R&D specialist in our Advisory team at Real Business Rescue. We’ll provide expert guidance on making your application to maximise the amount you receive, and help you write a comprehensive R&D tax claims report that details your project(s) and where costs were incurred.
Making claims for R&D offers many advantages to eligible businesses - R&D tax claims benefits include:
Another significant benefit of R&D tax claims is the wide range of research and development expenditure that can be claimed back. So what qualifies as R&D expenditure?
You can claim for a broad range of research and development costs. R&D qualifying expenditure includes:
Knowing which expenses to include in an R&D claim, and apportioning certain costs correctly, can be difficult – if you include expenditure that doesn’t qualify, HMRC may investigate.
For more information and professional guidance on R&D tax claims and expenditure, please contact our R&D specialists in the Advisory team at Real Business Rescue. We offer free same-day consultations, and operate an extensive network of offices around the country.