R&D tax reliefs explained
Research and Development (R&D) tax reliefs, or R&D tax credits as they are also referred, are government tax reliefs rewarding UK companies for investing in innovation and can have a valuable impact on small and large businesses alike. The government has set aside billions of pounds for claims over the coming years and the definition of qualifying companies is wider than you might expect – and definitely not the preserve of the scientists in white coats.
Businesses spending money on developing new products, services or processes and even enhancing existing ones, can be eligible for a sizeable reduction in their Corporation Tax and / or a cash payment to reward their investment. The relief is equivalent to 33p for every £1 of qualifying expenditure. This means that the tax relief is 230% of the amount invested in R&D activities.
“Thanks to Steve at Wilson Partners’ technical expertise and thorough understanding of our activities, the process to claim our R&D Tax Relief was hassle-free, meaning our focus remained on our business.” Relayware
100% success rate and risk free
At Wilson Partners we have a 100% track record in making successful claims amounting to £3.4m and counting. With little or no up front cost, we generally act on a no win, no fee* basis, meaning you have literally nothing to lose, but a lot to gain!
*In complex cases we may charge a nominal assessment fee.
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Whether you’re already claiming R&D tax reliefs or if this is a new ball game to you, we’ll be happy to look at your situation and give you a quick answer as to whether we think you’ve got a claim.
See how much relief you could receive using our calculator for SMEs
Most companies, including start-ups, fall into the SME category and can claim back up to 33p for every pound spent on R&D. Even if your business is loss-making you could receive a cash benefit. See how much you could potentially claim in our calculator below, simply select whether you’re profit or loss-making and select the amount of R&D investment – you could be pleasantly surprised.
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We can significantly improve your claims
“Steve at Wilson Partners instantly identified several qualifying projects which had not been included in previous claims. Working closely with our development team to prepare detailed project summaries the claim was accepted with no questions from HMRC, and the repayable credit was significantly higher than in previous years. Thank you to Wilson Partners for their hard work and dedication.”
Is my business eligible?
What qualifies as Research and Development (R&D)?
For R&D tax purposes, HMRC has quite a broad eligibility criteria. Contrary to many people’s beliefs, HMRC is sector agnostic when it comes to R&D tax reliefs. Ultimately if your company is taking a risk whilst attempting to ‘resolve scientific or technological uncertainties’ then there’s a chance this activity could qualify:
- Creating products, services or even new processes to support your business.
- Changing or modifying existing products, services or even new processes to support your business.
So if you’re undertaking, or have recently undertaken a project which you’re not sure is scientifically or technologically possible or if you’re not sure how to achieve it in practice you could be ‘resolving uncertainties’ and thus qualify R&D tax reliefs.
Within the definition of research and development, according to HMRC, R&D does not necessarily have to be successful to qualify. It’s worth noting that work completed on behalf of a client may also qualify subject to a number of checks.
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When putting together an R&D tax credit claim, we look for the following types of R&D expenditure to assess whether they qualify:
- Expenditure on staff including salaries, employer’s NIC and pension contributions.
- Expenditure on subcontractors and freelancers.
- Expenditure on materials and consumables including heat, light and power that are used up or transformed by the R&D process.
- Expenditure on some types of software.
A government backed tax incentive scheme whereby companies can receive benefit for expenditure on developing new products, services and processes.
The tax definition very different from the accounting definition and is much broader. The government define R&D for tax purposes as work carried out that seeks to achieve an advancement in science or technology where the chance of success is uncertain.
As you would expect, highly technical projects qualify for R&D tax credits but due to the broad definition, qualifying projects can also be as simple as merging two IT systems or improving a production process. So it’s important to review all projects.
SME’s will get an additional 130% tax deduction for qualifying expenditure, so for every £100 spent on R&D, you will get a £230 tax deduction.
Where the company has unrelieved trading losses, they can surrender the enhanced R&D tax relief for a repayable credit of 14.5%. So this gives a £33 repayable credit for every £100 of qualifying spend.
Employee and subcontractor costs generally make up the majority of an R&D claim. Certain consumables and a portion of admin costs can also sometimes be included. It is important that staff time spent on projects is recorded accurately to increase the robustness of the claim.
Companies have up to two years after the year end to make a claim.
We can work with your technical teams to identify the qualifying work carried out by the company, and then work with the finance team to identify the costs and make sure we maximise the consumables and indirect costs.