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.
Average client claim
Largest client claim
Total R&D claims in recent years
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.
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:-
Partner - Corporate and R&D Tax
R&D Tax Manager
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:
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.
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.
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.
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.
The use of sub-contractors outside the UK need not affect your claim for tax relief.
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.
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.
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.
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.
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.
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.
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:
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.