Research and Development, otherwise known as R&D is a tax relief that is awarded to UK companies who have invested into research and development to better the way they work, improve existing products and to develop new ones. This offers them an opportunity to claim either a reduction in corporation tax, or, for loss making companies, a payable tax credit. It can even be claimed for unsuccessful projects!
The scope for identifying R&D is huge, as it covers a plethora of sectors. Fortunately, if you are making a claim for the first time, you can typically claim R&D tax relief for your last two completed accounting periods.
The HMRC R&D criteria are purposefully broad. Whatever size or sector, if your company is taking a risk by attempting to ‘resolve scientific or technological uncertainties’ then you may be carrying out qualifying activity.
To benefit from R&D tax incentives, you must:
- Be a limited company in the UK
- Be subject to corporation tax
- Have spent money on research and development activities
- Have/Tried to overcome uncertainty
We only work with the best! Our partners have been awarded the Best New Tax Practice in the highly prestigious Tolley’s Tax Awards 2020, which are regarded as the gold standard in the tax advisory sector. Contact us today to see if you have a claim.
For Small & Medium Enterprises, otherwise known as SMEs, claiming R&D tax relief will only impact on the tax charge in the accounts. Your accounts will look better due to a reduced tax liability and/or a payable tax credit. Win win! Many clients ask us if they make a claim from a previous year, how will it affect that year’s accounts? The simple answer is that it will not. The claim can be reflected in the current year’s accounts and there is no need to amend or restate previous accounts.
The current rate of extra relief on qualifying expenditure is 130% (sometimes expressed as 230% when taking account of the tax relief received on expenditure regardless of making a claim). This means that if a company spends £100,000 on qualifying R&D, an additional deduction of £130,000 is given against taxable profits. Therefore, the company receives a total deduction of £230,000 from taxable profits. The current rate of corporation tax in the UK is 19% – this means that a claim which identifies £100,000 of expenditure benefits a company by reducing its tax bill by £24,700. This is is calculated as 130,000 (i.e. the extra relief given by the claim) multiplied by 19%.
If you’re still unsure if your company would qualify to benefit from a R&D tax relief, get in contact with our specialist advisors on 02085300720 or email firstname.lastname@example.org If you are confident that you can demonstrate that some kind of technical improvement has been made and that it wasn’t easy or certain on how to achieve the improvement, then there is a good chance you will qualify.
Watch our Nordens TV video ‘Free Cash Back From HMRC With R&D Tax Relief’where David Jaye, our head of business development and Mitch Hahn, our CEO, go into more detail about how you can make a claim.