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R&D tax relief was put in place when the government introduced the R&D tax relief in 2000 as an incentive to UK businesses to invest in advancements in the fields of Science and Technology. It rewards businesses across any sector by allowing them to reclaim some of their R&D expenditure.
How much you can claim for depends on your company size. SMEs can claim an effective 14-33% on qualifying costs. For large companies, a tax relief credit of effectively 8.8% is available under the Research and Development Expenditure Credit scheme. Use our handy R&D Tax Calculator to find out how much your claim could be worth.
HMRC qualify research and development as overcoming technological and scientific uncertainties or challenges; aiming at achieving a technological and scientific advance that couldn’t be easily worked out by a professional in the field.
Whatever size or sector, if your company is taking a risk by attempting to resolve these uncertainties, then you may be carrying out qualifying activity. This could include creating a new process, product or service or improving on an existing one.
The following categories of expenditure can be included:
Staff Costs: Cost of directly employing staff who are actively engaged in R&D activity. Includes: class 1 NIC, pension fund contributions, bonuses and (if applicable) payment to subjects involved i.e. for clinical trials.
External Contractors and Freelancers: Cost of paying a staff provider for staff provided to the company, or a sub-contractor who is directly and actively engaged in carrying out R&D activity
Consumable Items: Consumable or transformable materials used directly in carrying out R&D.
Software: Revenue expenditure incurred on computer software employed directly in R&D
Utility Costs: Power, water and fuel used directly in carrying out R&D
Although subcontracting can be a more complex area, you can still make an R&D tax claim. Eligibility may be affected by the contract details and who’s undertaking the risk and uncertainly of the project activities.You can claim for 65% of payments made to the subcontractor unless you’re part of the same group.
No – Only companies liable for Corporation Tax can claim through the scheme (limited companies).
Yes – the purpose of the scheme is not the outcome of the project,but the investment the company made towards technological advancements and intent that matters.
Location of the R&D activity doesn’t affect the eligibility of a company for R&D tax relief. If the company is paying UK corporation tax, it may incur qualifying costs that are linked to overseas R&D activities
Our R&D tax team can prepare your claim within 4 weeks of receiving all the necessary information. Once the claim is submitted, HMRC generally take 4 to 6 weeks to process a claim.
You can claim back two financial periods. For example, a business with an accounting year end of May 31st 2018 has until May 30th 2020 to claim or lose out.