Research and Development Tax Relief (R&D)
Our team has over 15 years experience helping clients identify and maximise their R&D claims. R&D tax relief is available to UK companies that spend money developing new products, processes or services; or enhancing existing ones. The product or service developed must be innovative and novel to qualify for the relief. You can make an R&D tax credit claim to claim generous levels of tax relief or to receive either a cash payment.
What is R&D relief?
There are two types of relief:
Small and medium sized entities (SME):
Provides a tax deduction for 230% of qualifying revenue expenditure.
For each £100 spent, a further £130 is deducted in the company’s corporation tax computation.
Up to 65% of subcontracted R&D spend can be claimed as qualifying cost under the SME scheme.
Capital expenditure may qualify for R&D capital allowances, 100% relief is given in the first year.
A tax credit is available to claim a cash refund from HMRC of up to 14.5% of a loss generated and surrendered for cash.
HM Revenue & Customs (HMRC) have made the large company regime much more generous by introducing the Research and Development Expenditure Credit (RDEC).
RDEC allows larger companies to recognise the benefit of their R&D spend effectively as an expense against cost, instead of showing the benefit within the tax line. This helps add visibility. Loss makers are now also able to claim cash back from HMRC.
Expenditure can attract the 10% RDEC credit. Unlike the old R&D scheme, which only had a cash value if the company was paying corporation tax; the RDEC is payable regardless of the tax position, subject to some restrictions including a cap based on PAYE and NI.
What size are you for R&D relief?
Companies qualify under the SME scheme if the following limits are not exceeded.
- 500 employees and
- turnover of 100 million Euros, or
- balance sheet total of 86 million Euros
If any of the above limits are exceeded the company qualifies under the large company scheme.
Which projects qualify for R&D tax relief?
Your company can only claim for R&D tax relief if an R&D project seeks to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty – and not simply an advance in its own state of knowledge or capability.
The project must relate to your company’s trade – either an existing one, or one that you intend to start up based on the results of the R&D.
If your company or organisation is claiming tax relief under the SME scheme it must own any intellectual property that might arise from the project.
- Experimental or theoretical work designed to increase knowledge in a technical area.
- Development of new products, processes of service where uncertainties need to be overcome.
- Design and manufacture of prototypes and pilot plants.
- Bespoke development of existing products o processes
A project will qualify as R&D if it seeks to extend the overall knowledge in a field of science or technology; or create a process, material, device or service which incorporates or represents an increase in overall knowledge; or make an appreciable improvement to an existing process, material, device or service or use science or technology to duplicate the effect of an existing process, material, device or service in a new or improved way.
Why choose us?
We have over 15 years experience helping SMEs across all sectors receive thousands of pounds to re-invest back into their businesses.
Some of the sectors we have successfully achieved claims;
- Architecture and building design
- Software development
- Product design and manufacture
- Veterinary research
- Motor vehicle design