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HOME / KNOWLEDGE / What would you do with an extra £102,000?

What would you do with an extra £102,000?

R&D Tax Relief

R&D tax relief is one of the best tax reliefs available to both loss-making and profit-making companies.

£102,000 – that’s the average amount we’ve secured in R&D tax relief for our clients.

SME R&D tax relief is one of the best tax reliefs available to both loss-making and profit-making companies.

The relief has been around since 2000 and last year over 25,000 UK companies claimed almost £2.9bn in tax relief.

During COVID19, HMRC are processing 95% of repayments within 28 days. Corporation tax repayments can be much quicker. A timely cash boost for many businesses.

R&D Tax Relief

£102,000

Average client claim

£1.1 million

Largest client claim

Over £100 million

Total R&D claims in recent years

SME R&D TAX RELIEF – HOW MUCH IS IT WORTH?

R&D tax relief is one of the best tax reliefs available to both loss-making and profit-making companies.

PROFIT MAKING?

Relief of up to 24.7p for every £1 spent

Profit-making SMEs can reduce their corporation tax bill, or receive a corporation tax repayment for any corporation tax already paid.

LOSS MAKING?

Relief of up to 33.35p for every £1 spent

Losses generated can be surrendered in exchange for a tax credit/cash refund at 14.5%. The amount available is the lower of the R&D enhancement and the trading loss post R&D.

SME R&D tax relief is available if you have: a) less than 500 staff and b) a turnover of under €100m or a balance sheet total under €86m. If the above doesn’t apply to you, then you may be eligible to claim Research and Development Expenditure Credit (RDEC). To find out which R&D tax credit scheme is right for your business, contact us for further details.

Frequently Asked R&D Questions

What is R&D tax relief?

Research and Development Tax Relief (R&D Tax Relief) helps innovative businesses undertaking R&D related activity claim a generous corporation tax deduction or a cash refund from HMRC. R&D tax relief is a tax incentive from the UK Government designed to encourage companies to invest in R&D. The scheme has been around since 2000 and last year over 25,000 UK companies claimed almost £2.9bn in tax relief.

What activities qualify as R&D?

To receive R&D Tax Relief you need to ensure that you have carried out an R&D project which meets the government definition for tax purposes and have incurred qualifying costs on this project.

HMRC qualify research and development as overcoming technological and scientific uncertainties or challenges; aiming at achieving a technological and scientific advance that couldn’t be easily worked out by a professional in the field.

Whatever size or sector, if your company is taking a risk by attempting to resolve these uncertainties, then you may be carrying out qualifying activity. This could include creating a new process, product or service or improving on an existing one.

​To claim R&D relief projects must meet all of the following criteria: 

  1. aims to create a scientific or technological advance in the overall field.
  2. has or has tried to overcome scientific or technological uncertainty.
  3. the uncertainties could not be easily worked out by a professional in the field.​

In our experience, claims are often overlooked because business owners over-estimate the level of innovation required to claim. Contact us for a free assessment.

Whatever your R&D project, R&D claims are increasingly being scrutinised therefore good record keeping and a strong technical narrative to substantiate your R&D claim is important.

Which expenses qualify for R&D tax relief?
Many first-time claimants find it difficult to identify the activities and costs they incurred in the last two accounting periods. Our R&D experts ensure all qualifying activities and expenditure is identified in order to maximise the claim. It is important to note, not all R&D related expenditure qualifies for R&D.
In order to claim R&D tax credits, you must have incurred revenue expenditure in relation to qualifying R&D activity. The following categories of expenditure can be included:

Staff Costs: Cost of directly employing staff who are actively engaged in R&D activity. Includes: class 1 NIC, pension fund contributions, bonuses and (if applicable) payment to subjects involved i.e. for clinical trials.

Externally provided workers and subcontractors: Cost of paying a staff provider for staff provided to the company, or a sub-contractor who is directly and actively engaged in carrying out R&D activity.

Consumable Items: Consumable or transformable materials used directly in carrying out R&D.

Software: Revenue expenditure incurred on computer software employed directly in R&D.

Utility Costs: Power, water and fuel used directly in carrying out R&D.

Does my project qualify?

HMRC qualify research and development as overcoming technological and scientific uncertainties or challenges; aiming at achieving a technological and scientific advance that couldn’t be easily worked out by a professional in the field. In our experience, claims are often overlooked because business owners over-estimate the level of innovation required to claim. Contact us for a free assessment.

How do you quantify a claim?

The R&D claim is based on a just and reasonable assessment of the proportion of costs relating to research and development activities, i.e. time spent by R&D staff on qualifying activities. There is no requirement to record time against R&D projects, however it could prove beneficial in ensuring a robust claim is put forward to HMRC.

What kind of projects do not qualify for R&D tax credits?

Routine analysis, copying or adaption of an existing product, process, service or material, as well as attempting to improve the cosmetic or aesthetic qualities of a product, process, service or material will not itself be R&D. However, work to create certain cosmetic or aesthetic effects through the application of technology can still qualify. Other non-qualifying activities include but are not restricted to, commercial or financial steps necessary for innovation, production, distribution, storage and repair.

How do I get my money?

If your company is loss-making, you can claim back up to 33% of your qualifying spend by surrendering a loss created by the relief for a payable cash credit. In other words, you can get up to 33p back for every £1 you spend.

If you are profit-making, you can claim back up to 24.7% of your qualifying spend, i.e. 24.7p for every £1 you spend. This is a reduction in your corporation tax liability. Where you have already paid your tax bill, the relief is given in the form of a corporation tax repayment. It is possible for the relief to create a loss, in which the loss created by the claim can be surrendered for a cash credit from the government.

I use foreign subcontractors from outside the United Kingdom, can I claim on those costs too?

The use of sub-contractors outside the UK need not affect your claim for tax relief.

How many times can I claim?

You can claim R&D tax credits after each financial period (when you submit a corporation tax return) as long as you are creating a new advancement in science or technology.

How far back can I claim?

The R&D incentive is a Corporation Tax Relief. It is inserted in the Corporation Tax Return and the deadline for amending this return is 24 months after the end of your accounting period. Therefore, you are able to claim back two financial periods. For example, a business with an accounting year end of May 31st 2019 has until May 31st 2021.

How long does the process take?

Our R&D tax team can prepare your claim within 1 week of receiving all the necessary information. Once the claim is submitted, HMRC generally take 4 to 6 weeks to process a claim.

Can you work with my accountant?

We work with a large number of external accountants and introducers. Our team are happy to liaise directly with your accountants to obtain all the relevant financial documentation. We will prepare a technical report and a claim statement that your accountant can use when submitting your corporation tax return.

Can directors’ dividends be included in R&D tax credit claims?

Directors’ dividends are not classed as qualifying expenditure for the purposes of research and development (R&D) tax credits. Therefore, you cannot include these in your claim. While there are personal tax benefits from being remunerated via dividends, rather than a salary, this could have a substantial effect of the value of an R&D tax credit claim.

The staff costs that can be included in an R&D tax credit claim include:

  • Salaries
  • Employer NICs
  • Employer pension contributions, and
  • Some reimbursed business expenses
What about HMRC investigations?

The level of HMRC investigations significantly on the rise. On average, our enquiry rate less than 1%, meaning over 99% of claims are approved on submission. Where HMRC opens an enquiry, our fee covers all of our professional time and costs in handling an enquiry (which can be significant).

Some R&D advisers claim a 100% success rate without any supporting evidence. It’s impossible not to attract an enquiry at some point, especially for long-established specialists such as ourselves. Dubious claims such as this also goes against ICAEW and PCRT guidelines.

HOW TO CLAIM R&D TAX RELIEF

Jeffreys Henry LLP provide an end-to-end service that makes claiming R&D tax credits easy for you.

1

FREE R&D ASSESSMENT

We talk to your finance and tech team to hunt down every qualifying R&D activity.
Call Now: 0207 309 2222
2

R&D CLAIM PREPARATION

Our dedicated R&D account manager will work with you to document each R&D activity and split out the qualifying costs.

Read our guide on how to keep suitable records to maximise your R&D claim

3

SUBMISSION TO HMRC

Once finalised, we’ll submit your claim to HMRC’s specialist R&D unit.
Established for over 120 years, Jeffreys Henry LLP is an ICAEW registered accountancy firm, with a specialist R&D tax team, giving you peace of mind of a robust R&D claim.

START YOUR R&D CLAIM NOW

R&D Tax Specialists Parminder Chattha

PARMINDER CHATTHA

Partner - Corporate and R&D Tax


Parminder specialises in Research & Development Tax Credits, leading the R&D department at Jeffreys Henry LLP. Since joining the Firm in 2015, he has been working closely with both SMEs and large businesses to analyse and maximise their Research and Development claims. He has so far secured over £70 million in R&D tax relief and credits for our clients.
jon-isaacs-jeffreys-henry.jpg

JON ISAACS

Partner


Being close to Silicon Roundabout and London’s Tech City UK, Jon assists a large number of technology, digital and media companies with their R&D tax relief claim.

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Jeffreys Henry LLP is a Limited Liability Partnership registered in England and Wales with registered number OC306971. Registered to carry on audit work in the UK and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales. Details about our audit registration can be viewed at www.auditregister.org.uk under reference number C001108797. VAT Registration Number 243307782. A list of Partners is available for inspection at the below address. Jeffreys Henry Audit Limited is registered in England and Wales with Company number 13172931. Registered to carry on audit work in the UK and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales. Details about our audit registration can be viewed at www.auditregister.org.uk under reference number C008924259. VAT number 374306694. A list of Directors (who we also refer to as Partners) is available for inspection at the below address. Jeffreys Henry Business Services Limited is registered in England and Wales with Company number 13128469. VAT number 369869417. A list of Directors (who we also refer to as Partners) is available for inspection at the below address. Each entity’s registered office is at Finsgate, 5-7 Cranwood Street, London, EC1V 9EE.
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