Research & Development Tax Relief – FAQs
What is Research & Development tax relief?
The R&D tax relief scheme was designed to provide an incentive to companies using science or technology to create innovative products, services or processes by giving additional tax relief for the costs incurred.
The current rate as it applies to SME’s enables companies to treat qualifying R&D expenditure at 200% of its value for the purpose of calculating their corporation tax. For large companies, or in certain circumstances where outside assistance has been given, the current rate is 130%. Where companies are making a loss, this can be surrendered to claim an R&D tax credit in the form of cash.
Does my business qualify for R&D tax relief?
The eligible criteria covers many areas and if you are operating within a manufacturing, engineering or software/technology based field it is very likely that you will have qualifying activities for R&D tax relief. There is a common misconception that what most people consider to be day-to-day operations will not qualify for this relief. We can readily ascertain relevant qualifying R&D activities as we have a broad range of experience in many industry sectors.
What qualifies for R&D tax relief?
It is possible to make a claim for almost any expenditure incurred in respect of research and development. Such expenditure could include staffing costs, subcontract work, consumable materials, establishment costs, software and even training. It is also possible to claim for costs incurred in respect of project management and the testing of prototypes. We can assist you in identifying projects that qualify for relief.
How much can my business claim?
It is possible to claim up to 200% of the costs incurred in the R&D process. To make a claim, the minimum qualifying annual spend on R&D has to exceed £10,000, and the claim must be made within two years of the financial year to which the expenses relate. It is therefore possible to amend Corporation Tax Returns already submitted for earlier years. We will ensure that the correct rate of relief is claimed for each specific project.
How does my business make a claim?
In order to make a claim it is best practice to provide HMRC with calculations to support the claim, along with a detailed technical report to define exactly what R&D your company has undertaken. A detailed understanding of HMRC rules is essential in order to prepare and justify an accurate claim for R&D Tax Relief. We have considerable experience in making R&D claims and have established a set process in which we collect all the relevant information from you, process the data and present it to HMRC.
Is it possible to make a claim myself?
Whilst it is possible to make a claim yourself this is a highly specialised area. Without the guidance of experienced advisers, it is likely that you will exclude some of the relevant eligible expenditure which may significantly reduce the claim. We are able to present your claim in a format accepted by HMRC, thus reducing the risk that the claim will be queried or rejected.
Why has my agent not already made a claim?
This is a very specialist area and it is not generally possible to establish whether a company is eligible to make a claim without technical knowledge of the processes your company undertakes and the state of art within your industry sector. We have a background in engineering and taxation and are highly conversant with the R&D process. This enables us to bring together the required skills to establish what R&D has been undertaken, the associated costs and convey the technical process to HMRC.
Can you work with our accountant and other advisors?
We are specialists in R&D tax relief and do not provide general accountancy and tax advice. We therefore need to work with your current advisers and will liaise with them directly if preferred. We already work with many accountants and tax advisers to assist them in making R&D tax relief claims on behalf of their clients.
How much will it cost to make a claim?
We base our fees on a percentage of the amount of tax you will save, therefore, unless you realise a tax saving you will not get a fee from us. Our fees are not payable until the tax is due or the refund is received by you and in the unlikely event that HMRC raise any queries with regard to the claim, we will not make any additional charge.