What you need to know about R&D tax credits
Research and development tax relief is designed to encourage the UK’s businesses to increase their investment in R&D. You can use R&D tax credits to reduce your tax bill or fund further research and development projects.
Sadly, however, many companies remain unaware that they are eligible to make and R&D claim, while others wrongly assume that they won’t qualify for it. Some estimates suggest that up to 90% of businesses don’t know that they could make a claim.
The credits are also designed to make the UK industry more innovative and to help it retain its position as a leading player on the global stage. They were also created to attract investment into the UK and to encourage companies based overseas to engage in UK-based R&D.
The requirements for eligibility are broad, and several points are left open to interpretation. However, if your projects involve attempts to ‘resolve scientific or technological uncertainties’ and you are a payer of UK corporation tax, there’s a strong chance you could be eligible.
Loss-making companies also eligible
To qualify for HMRC R&D tax credits, you must be working – or have worked – towards an outcome that you didn’t know was technologically or scientifically possible, and the outcome mustn’t be easily deducible by a competent professional working in the field. The purpose of the relief for loss-making businesses is to help offset costs and be able to continue their work in research and development.
Which expenses can I claim?
The initiative is designed to enable organisations to cover some of their expenditure on R&D projects. This includes money spent on salaries, subcontractors and freelancers, material costs, and expenditure on certain software and consumables that are required for research and development.
You can use the relief for various purposes, including reaching the milestone you are targeting, starting a new project or re-investing it back into your business. You will normally have two years from the end of the accounting period in which the project ended to make a claim.
How to qualify
To qualify for R&D tax credits, a project must aim to “achieve an advance in science or technology” by resolving “a scientific or technological uncertainty”. The knowledge of how to achieve your desired outcome must either be unavailable or not known to the public, which means it could be a trade secret. Companies in any industry can be eligible, but sectors where R&D is most frequently carried out include manufacturing, engineering, software development and land remediation.
How R&D Tax Solutions can help
At R&D Tax solution in Manchester, we have extensive experience in assisting companies from a wealth of industries including those mentioned above. Our tax specialists can help you determine if your project is eligible for an R&D claim, assist with the claims process and liaise with HMRC on your behalf. Contact us today about our tax advisory services.