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 76,000 SMEs claimed almost £4.4bn in tax relief. see here for more R&D statistics.
Since 2011, Jeffreys Henry’s specialist R&D tax team have provided an end-to-end service to existing clients, new businesses and our network of professional introducers.
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.
£1.1 million
Single Largest R&D Claim
Over £100 million
Total R&D claimed by our
R&D tax specialists 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.
WHAT QUALIFIES AS AN R&D PROJECT?
A qualifying project is one where there is an advance (or an attempted advance) in a field of science or technology.
This sounds quite restrictive, but in practice it could apply to any company and in any industry.
The term “Science” is very broad and can include Computer Science, Food Science, Engineering, Medical / Clinical Research etc.
The company needs to have a systematic project in place, and the work which you are undertaking must be seeking to achieve an advance in science or technology, e.g. development a new product, process or service, or appreciably improving an existing one.
Generally, where a company has faced technical problems that have to be solved and there is no standard solution which could be utilised, then that is a good indicator that R&D activities are taking place.
As per the government definition, to qualify for R&D tax relief, your project must seek to:-
- Extend overall knowledge or capability in a field of science or technology; or
- Create a process, material, device, product or service which incorporates or represents an increase in overall knowledge or capability in a field of science or technology; or
- Make an appreciable improvement to an existing process, material, device, product or service through scientific or technological changes; or
- Use science or technology to duplicate the effect of an existing process, material, device, product or service in a new or appreciably improved way (e.g. a product that has exactly the same performance characteristics as existing models, but is built in a fundamentally different manner), will therefore be R&D.
In our experience, claims are often overlooked because business owners over-estimate the level of innovation required to claim. Contact our R & D tax specialists for a free assessment.
FREE R&D ASSESSMENT
AND REPORT
Why Use Jeffreys Henry?
- ✓ ICAEW regulated firm and established for over 120 years
- ✓ PCRT compliant
- ✓ Significant R&D experience with dedicated and qualified R&D manager
- ✓ Over £100m in successful R&D claims in recent years
- ✓ No upfront fee
- ✓ Dynamic and competitive pricing
- ✓ No win, no fee
- ✓ Dedicated industry experts, R&D tax specialists and CTA qualified corporate tax team
- ✓ In-House industry specialists, including software/mechanical engineers, manufacturing experts and computer scientists
- ✓ Our qualified accountants and industry experts will review your financial records to maximise your claim
- ✓ Commission based referral scheme
- ✓ On average, our enquiry rate by HMRC is 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 investigation (which can be significant)
HOW TO CLAIM R&D TAX RELIEF
Jeffreys Henry’s R&D tax specialists 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.
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 is an ICAEW registered accountancy firm, with a specialist R&D tax team, giving you peace of mind of a robust R&D claim.
LEADING R&D TAX SPECIALISTS – START YOUR R&D CLAIM NOW
PARMINDER CHATTHA
Partner - Corporate and R&D Tax
Parminder specialises in Research & Development Tax Credits, leading the R&D department at Jeffreys Henry. 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 £100 million in R&D tax relief and credits for our clients.
KATE GREENHOUGH
Corporate and R&D Tax Director
Kate is a CTA-qualified tax specialist with significant Corporate and R&D tax relief experience. She has over 10 years of specialist experience preparing and optimising R&D tax relief (under SME and RDEC) and Patent Box claims in line with the latest HMRC guidance.
R&D Tax Relief
Frequently Asked Questions
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:
- aims to create a scientific or technological advance in the overall field.
- has or has tried to overcome scientific or technological uncertainty.
- 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.
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 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.
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 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.
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.
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.
RELATED R&D NEWS
20 June 2022
HMRC have temporarily suspended some Research and Development Claims as a means of putting an end to the abuse of R&D. Who Will be Affected? HMRC […]
8 March 2022
Jeffreys Henry is committed to the progression of equality for all women and so in recognition of International Women’s Day 2022, we wanted to share the experiences of some of the wonderful women working with JH, as well as their perspectives on how things have progressed for women working in accounting. A big thank you to all the women who shared their inspiring stories with us! Together, we can #BreakTheBias.
31 January 2022
HMRC has released its review of R&D tax relief (also known as R&D tax credit), alongside details that confirm extra measures that will be put in place to end the abuse of R&D tax relief. Recent data suggests a loss of over £300 million due to fraud and error in R&D claims. In such cases, companies had claimed cash through the payable tax credit, despite having no R&D activity. Moreover, HMRC have also identified structures that had been set up with the intention to claim the payable tax credit, despite there being little employment or activity in the UK.
11 January 2022
In the Autumn 2021 budget, Chancellor Rishi Sunak announced significant changes to R&D tax relief. From April 2023, the qualifying expenditure categories will be widened to […]
1 November 2021
Key steps to a successful R&D tax relief claim. HMRC have displayed no sign of relaxing their position in respect of R&D tax credit claims in terms of querying both eligibility and qualifying expenditure.
20 May 2021
£102,000 – that’s the average amount we’ve secured in R&D tax relief for our clients. R&D tax relief is one of the best tax reliefs available to both loss-making and profit-making companies.
9 March 2021
HMRC have introduced a restriction for the amount of R&D tax credit received by SMEs in a year. Effective from 1 April 2021, the cap is set at £20,000 plus three times the company’s total PAYE and NIC liability for SMEs claiming R&D tax credits.
18 November 2020
Research & Development (R&D) tax relief is often overlooked by food and beverage manufacturers, product developers, food scientists, and food clinical researchers.
26 May 2020
The government has classed the CBILS and the Bounce Back Loan as ‘Notified State Aid’ (NSA) under the European Commission’s new Temporary Framework for COVID-19. If a company receives CBILS or the Bounce Back Loan, then it will not be possible to claim SME R&D Tax Relief for that project as a company can only be in receipt of one form of NSA on any one project.
11 March 2020
The Chancellor, Rishi Sunak, delivered the 2020 Budget with a plan to invest in research and development (R&D) and cutting-edge technologies. The government will increase investment […]
