Calculating your R&D Tax Credits

Specialist accountants and software for calculating your R&D tax credits

It’s no secret that many businesses are missing out on valuable tax credits, either because they don’t know they’re eligible or because the process of applying and calculating the credits can be very complex. Companies that carry out research and development work, however, can benefit significantly from an R&D tax credit claim, and with specialist accountants and software on hand to help, there’s no reason why organisations shouldn’t reap the rewards they’re due.

How tax credits are calculated

Simply put, small businesses can, under the SME scheme, receive a government subsidy of up to 26p for every £1 spent on innovation and problem solving. This has to be of a scientific or technological nature, and have the potential to carry an industry-wide benefit as opposed to solely advancing the innovating business’ position in the market.

The SME scheme rates are slightly difference, depending on whether the company in question is profit or loss making. For a profit-making business that has £100,000 of qualifying expenditure, the R&D claim calculation is as follows:

£100,000

x 130% enhancement = £130,000

x 19% Corporation Tax Rate = £24,700

The £100,000 spend returns 25% of R&D expenditure to the business, which can be re-invested in further projects. For loss-making businesses, the same qualifying expenditure can return up to 33.35%, as outlined below:

£100,000

X 130% enhancement = £130,000

Enhanced R&D = £230,000

£230,000 x 14.5% = £33,350

Is there software I can use to help me make this calculation?

If calculating your HMRC R&D claim is proving tricky, try using a tax credit calculator to help you work out the costs. Fill in the relevant fields, detailing the sum cost of materials as well as staff costs and CT liability and the calculator will provide a total R&D spend. The value of your claim can then be deduced.

Factors affecting your claim

Bear in mind that there are some factors that impact your R&D tax credit claim. Grants and subsidies can move the qualifying spend into the Large Company scheme, meaning the percentage you can claim is reduced.

Seek assistance

Any SME owners who believe they may be eligible for an R&D tax credit claim, but aren’t sure how to tackle the claims process should seek assistance from a specialist accountant. R&D Tax Solutions can work on your behalf to ensure you get the credit that’s due to your business, as well as identifying other upcoming projects that could qualify for R&D Tax relief.

Contact us today on 0161 298 1010 or visit our office in Manchester to find out more about making a tax credit claim.