Looking out to claim R&D tax relief, read this absolute and updated guide to check your eligibility and R&D Tax Credit rates. 

In a bid to maintain the UK’s technological edge over other countries and to boost the tech sector, the UK government has introduced much-needed and much-appreciated initiative dubbed as Research and Development (R&D) tax reliefs. A wide array of sectors that strive to excel in their areas through advanced research can claim R&D reward. 

What Counts as R&D? 

If your organisation is doing work on a project related to science or technology, then it qualifies for R&D tax relief. However, any project that advances or furthers a social science’s knowledge, like pure maths or economics, will not qualify for R&D tax relief. 

Also, in a bid to qualify for R&D tax relief, the research project must have a direct relation with the trade of your company – the project can be both: dealing with the existing trade/product or a new product that your organisation intends to produce based on the results of the research or development. 

Also, the project on which you are going to claim R&D tax relief should be directly associated with your company’s trade. 

R&D Tax Credits 

The UK government gives cash payment and tax reductions under the banner of R&D tax credits to those companies that invest in research and thrives on innovation. Since its inception, the initiative has become a key source of capital for conglomerates investing in research and development and maintain their innovation-based growth by hiring new staff. 

How to make an R&D Tax Credit Claim? 

There are two ways to claim R&D tax credits: 

1. You can file an R&D Tax Credit claim following which the government will give you a cash payment;

2. Or, you can claim R&D Tax Credit in the form of a reduction in corporation tax. 

It is pertinent here to mention that if it is the first time that you are claiming the R&D Tax credits, you are then eligible to file a claim for the previous two tax years also. 

Check Your Eligibility For R&D Tax Relief 

Surprisingly, most businesses in the UK are not aware of the fact that they are eligible to apply for R&D tax relief. However, there are certain conditions that your organisation must fulfill to claim the tax credits. These are: 

1. Your company is registered as a Limited Company in the United Kingdom and pays corporation tax;

2. It carries out development and research activities;

3. And your company spends cash on these R&D activities. 

You can recover up to 33{f5c46dbfd7a370437117a81398f3ac99c38e148024d17c03e20eb6cfc854a7af} of the total amount that you have spent on research and development by simply applying for R&D tax credits. 

BRAVO! 

It’s massive. Isn’t it? So what’s stopping you? 

Our clients have managed to save from tens of thousands of pounds to hundreds of thousands of pounds via R&D Tax Reliefs. 

To learn more about R&D Tax Credits, contact US and we’ll take care of the rest. 

Expenditures that qualify for R&D Tax Relief 

Though innovation excels development at unprecedented rates, yet it usually comes against a very heavy price tag. And it’s great if you can recover up to 1/3rd of this cost R&D tax relief initiative. 

To claim R&D tax credits, first, you should find out what expenditures count as research and development costs and hence qualify for the relief. 

1. Staff Cost: This section usually makes the bigger chunk of the costs of 

the expenditures related to R&D. But under this laudable initiative, you can claim tax credits on wages, pension contributions, and ENI (Employer National Insurance). Your employees might dedicate all of their time to research and development or just part of it. You can also claim tax credits for certain reimbursed expenditures. 

2. Material: The amount spent on such material that your company has 

used or transformed during research and development also qualifies for the tax credit. 

3. Computer Softwares: The amount spent on acquiring software also 

qualify for the R&D tax relief. 

4. Payments regarding clinical trials. 

We’ve managed to save tens of thousands of pounds for our clients by solving the complex puzzle of qualifying costs. So, contact us, and let’s start! 

ProTip: To claims R&D Tax Credits, the size of your business does not matter at all. 

Types of R&D Tax Relief Schemes 

Depending on the size of your business, R&D Tax Credit is divided into two categories. 

1. R&D Tax Relief for SME: The first type is available for small and medium-sized enterprises. If your company has less than 500 employees, its turnover is less than €100 million or gross assets equal to €86 million, then it falls in SME and qualifies for the R&D tax relief for SME and you will make claim for SME R&D tax credit scheme. 

2. R&D Tax Relief for Large Companies: The second type of R&D tax 

relief is available for large companies. So, if your organisation has over 500 employees, its turnover is greater than €100 million and its gross assets exceed €86 million thresholds, then it will make a claim for R&D Tax Credits for large companies and you’ll apply for this through RDEC (Research And Development Expenditure Card). 

The tax relief that you’ll get under the R&D tax relief initiative depends on how much amount your organisation has spent on research and development. As stated above, first you have to identify qualifying costs, and then you’ll enhance these qualifying costs by the relevant rate [rates are different for SMEs and large corporations. We’ll discuss them below]. Doing so will give you ‘enhanced expenditures’. 

In the next step, you’ll either subtract these enhanced expenditures from your taxable income or if include them to losses if you are making a loss. This will result in: 

a. If your company is making a profit, then a reduction in corporation tax; b. If your company is incurring losses, then you’ll receive a cash credit; c. Or a combination of A and B. 

Rates for SMEs and Large Companies 

If your company falls in SME and is incurring losses, then you can make a claim for tax credits up to 33{f5c46dbfd7a370437117a81398f3ac99c38e148024d17c03e20eb6cfc854a7af} of the total qualifying costs. If your company is SME and making profits, then you can file a claim for R&D tax credits up to 25{f5c46dbfd7a370437117a81398f3ac99c38e148024d17c03e20eb6cfc854a7af} of the total qualifying costs. 

As far as large corporations are concerned, they can claim up to 13{f5c46dbfd7a370437117a81398f3ac99c38e148024d17c03e20eb6cfc854a7af} of the total qualifying costs. Previously, it stood at 11{f5c46dbfd7a370437117a81398f3ac99c38e148024d17c03e20eb6cfc854a7af} till Dec-2017 and 12pc from Jan-2018 to March-2020. 

Coming to the benefits of claiming R&D tax credits, I think this needs no explanation as perks are wide-ranging. By making a successful claim, you can get back tens of thousands of pounds if your company is SME and millions of pounds if your company is a large corporation. You can then reinvest this money in further R&D or in any new business initiative. 

As far as the government is concerned, it benefits as hundreds of thousands of new jobs are created. This initiative also helps the UK in maintaining the technological edge over other developed countries. 

If you have any further questions or there’s some sort of ambiguity, feel free to contact US as we ensure that you get maximum value from the R&D Tax Relief Scheme.

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