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R&D tax credits are an incentive provided by the UK government to encourage companies to undertake innovation and development activities. The relief is based on the R&D costs that your company incurs and can be used to either reduce the amount of tax that your company pays or to receive a cash payment from HMRC.
Successfully claiming R&D tax credits will:
Any company in any industry may be eligible for R&D tax credits, however, you must be undertaking development activities that seek to achieve an advance in science or technology, or activities that directly contribute to advances by resolving scientific or technological uncertainty. While this sounds very complicated, please don’t be put off, in reality a huge number of businesses are doing this without realising. The outcome of the project can be tangible, such as new products or processes, or intangible, such as knowledge or cost improvements, even failed projects can qualify.
The following costs may qualify for relief:
Many businesses are unaware that claims can be made for capitalised expenditure and miss out on significant extra benefits. We can assist in identify any qualifying capital expenditure and advise on how to maximise your R&D claim benefit.
The resulting cash benefits of a successful R&D tax credit claim, based on different levels of qualifying costs, are below. To see the full benefits of claiming R&D tax credits depending on the size of your business, click here.
| Costs qualifying for R&D tax credits | Benefit when surrendering losses for a cash payment from HMRC | Reduction in tax payable where 230% relief is used to offset future corporation tax liabilities of your company |
| £100,000 | £33,350 | £43,700 |
| £500,000 | £166,750 | £218,500 |
| £1,000,000 | £333,500 | £437,000 |
Many businesses claim R&D tax relief and it can be an essential source of much needed cash. However, we find that many are unaware of what projects and expenditure types are eligible, and we also see mistakes in claims. As a result, your claim may be missing expenditure that could rightfully be claimed, or it may include costs that aren’t qualifying, which could mean risking an HMRC enquiry into your claim.
We take time to listen to your business to understand the goal you’re trying to achieve with your innovation, so we can help you overcome problems and challenges along the way. By being open and honest, we aren’t afraid to challenge our clients to make sure that your claim is correct and you’ve optimised the benefit. We want to help you understand your eligible activities, without holding you up, so you know how to build a robust R&D claim. We're here to fully support you with preparing and claiming R&D tax credits.
Finding yourself at the heart of an HMRC enquiry can be a fright, disruptive and costly. If you’ve received an enquiry letter you might be facing months of correspondence and a delay in the credit being paid to you. Worst case scenario, HMRC could reduce the claim value or even issue penalties for a poorly prepared claim. With a bit of support, the complex enquiry process can be less daunting and time-consuming.
We understand what HMRC is looking for in their requests and will guide you through the process calmly, providing realistic advice on what you need to do and when.
If you would like to speak to one of our R&D experts to find out more about how we can help, please get in touch via the form below.
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Iain Butler
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