What you Need to Know About R&D Tax Credits
Since the Research and Development (R&D) Tax Credit Scheme began in the tax years 2000/2001, almost £14 billion in tax relief has been claimed by businesses.
However, whilst many companies qualify for R&D Tax Credits, large amounts of the tax relief available remains unclaimed every year.
It’s easy to feel overwhelmed when you’re reading all the information available on the scheme. However, it’s actually easier than you think to understand R&D Tax Credits without getting caught up in every detail.
What are R&D Tax Credits?
The R&D Tax Credits Scheme was brought in by the Government to give UK businesses incentive to become more globally competitive in the fields of Science and Technology. Simply put, the scheme encourages and rewards innovation in the UK and is one of the biggest funding sources for this type of project, whatever sector your business operates in.
To qualify, you must be a company that’s liable for Corporation Tax.
The scheme works by:
- reducing the amount of profit that’s taxable so your business won’t be liable to pay as much Corporation Tax
- helping SME (small or medium-sized enterprises) which aren’t making a profit by providing cash sum instead
What Type of Projects Would Be Eligible?
To be eligible for R&D tax relief, a company needs to be carrying out a project which clearly demonstrates work towards an advancement in knowledge or capabilities in the areas of Science and Technology.
There are three schemes for claiming R&D tax relief and these all depend on the size of the company:
- The SME Scheme
- Large Company Scheme
- Research and Development Expenditure Credits (replaced the Large Company Scheme from April 2016)
Qualifying projects could include new advances or improvements on current processes, products or services. This must be by resolving an aspect of scientific or technological uncertainty.
However, the project MUST be related to the trade your business is carrying out or intends to carry out as a result of the R&D work.
R&D Tax Credit Example
An example of an eligible project could be something as simple as a company creating their own IT software to implement as their new management system.
The company could only claim with regards to revenue expenditure, utilities involved, materials used, software required and the wages of those working on the project including external labour costs.
This would be subtracted from their accounted profits in these specific areas and they would only be liable for Corporation Tax on the remaining amount.
This is just an example of the way an R&D Tax Credit Claim could work.
Fill out our R&D Tax Credits calculator if you want to see how much your claim could be worth.
Can I Make a Claim?
Before submitting a claim to HMRC, professional advice is available to ensure you’re eligible and maximise your chances of success.
Here at R&D Tax Solutions, we can provide you with all the help and support you need with your claims for this scheme. From our Manchester location, we specialise in this particular area, so our in-depth knowledge and experience have made us R&D claim experts.
We’re a no win, no fee company and to date we’ve had a 100% success rate.
So, if you need an expert to guide you through the process as easily as possible, get in touch by calling 0161 298 1010 or emailing firstname.lastname@example.org.