Research & Development

Many businesses don't realise they qualify for Research and Development (R&D) tax credits or do not claim their full entitlement.  Businesses that incur costs in developing products, processes, software or services can apply for a corporation tax deduction or even a cash payment from HMRC.

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Research and development relief

The Research & Developments (R&D) tax credits is an incentive scheme designed to encourage innovation and increase spending on R&D activities by companies who operate in the UK.  

The Small or Medium Sized Enterprise (SME*) R&D scheme was introduced in 2000.  Since then rates have risen significantly.  The current tax relief allows companies to:

  • deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction
  • claim a tax credit if the company is loss making, worth up to 14.5% of the surrenderable loss

* For a company to be regarded as an SME it must have less than 500 staff and meet at least one of the following: an annual turnover not exceeding €100 million or an annual balance-sheet total not exceeding €86 million. 

The Research & Development Expenditure Credit (RDEC) scheme replaced the Large Company Scheme in 2016.  RDEC can also be claimed by SMEs who have been subcontracted to do R&D work by a large company or who have received a grant or subsidy for their R&D project.  The current RDEC rate is 12% of your company's qualifying R&D expenditure (this rate applies to expenditure incurred on or after 1 January 2018) and is taxable.

What constitutes R&D?

To get R&D relief businesses need to explain how a project:

  • looked for an advance in science and technology
  • had to overcome uncertainty
  • tried to overcome this uncertainty
  • couldn’t be easily worked out by a professional in the field

The project may research or develop a new process, product or service or improve on an existing one.

How we can help

Needless to say the savings can be extensive and with the right tax advice, making an R&D claim is relatively straight forward.

We have proven experience of successfully preparing and agreeing R&D claims across a number of sectors including manufacturing, engineering, software and technology.  To find out more about claiming R&D tax credits, please contact us on 023 9248 4356.

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