SMEs can claim back up to 33% of qualifying costs incurred whilst resolving scientific or technological uncertainties (11% for large businesses) through HMRC Research and Development Tax Credits. Our in-house tax experts have a 100% success rate when it comes to claiming R&D tax relief, below they provide a simple guide to the scheme.
HMRC R&D Tax Credits are a government scheme designed to help innovative UK businesses. Through Corporation Tax deductions or a cash payment, HMRC R&D tax credits reward investment in innovation and are a valuable source of funding for growth. The R&D regime has been historically misunderstood with many businesses thinking it is reserved for cutting-edge scientific research.
In fact, R&D tax credits are very generous, and are available for any activities that take a risk by attempting to ‘resolve scientific or technological uncertainties’. When it comes to claiming R&D tax relief, such activities include but are not limited to:
Determining whether innovation qualifies for the scheme, along with understanding what costs are eligible, can be complex.
The project must seek to resolve scientific or technological uncertainties.
This does not just include cutting-edge scientific research done in a laboratory, but also design and engineering work which involves overcoming difficult technological problems such as creating or making appreciable improvements to new processes, products, or services; software development; engineering design and new construction techniques across a whole range of industries.
The research and development does not need to be ‘novel’; if similar technology has already been developed but is not readily available (e.g. trade secret), then the R&D qualifies.
HMRC R&D guidance encourages us to consider:
Any UK company that is subject to Corporation Tax (regardless of size or industry).
|Size||Not more than £100m turnover or £86m gross assets and fewer than 500 staff. Most companies fall into this category.||500 staff or more and either more than £100 million turnover or £86 million gross assets.|
|Scheme name||R&D tax relief for SMEs||Research and Development expenditure credits (“RDEC”)|
|Claim value||The R&D credit increases tax deductions to 230% on eligible costs.Loss making companies can claim a cash payment of 33% of eligible costs.||The RDEC scheme credit is 13% of qualifying costs (accounted for above the line). The credit is taxable, thereby creating a cash benefit of 11% (by offsetting a tax liability or generating a cash repayment|
A variety of costs directly attributable to the development project are eligible. These include:
Certain costs, such as production and trademarks are not eligible.
Elemental’s experts will work with your development/research staff and financial controllers to identify qualifying projects and tabulate eligible costs. We quantify the claim and prepare a report to submit to HMRC to support the numerical analysis. Our thorough approach and high standards have guaranteed a 100% success rate to date.
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