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.
Loss-making SMEs can choose to surrender their loss and receive a tax relief by way of a credit – a cash refund paid by HMRC of up to £33,000 for every £100,000 spent on qualifying R&D expenditure.
Clients normally get their money 4-6 weeks after submission. Different rates of relief apply for larger companies with a turnover in excess of €100m. Contact us for further details.
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.
It’s important to note that R&D doesn’t have to be successful to qualify for R&D tax credits. You can also claim for work undertaken on behalf of a client as well as your own projects.
The cost of directly employing staff who are actively engaged R&D activity. Staff costs can also include class 1 NIC, pension fund contributions and bonuses.
The 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 or transformable materials used directly in carrying out R&D.
Revenue expenditure incurred on computer software employed directly in R&D.
Power, water and fuel used directly in carrying out R&D.
A site visit of the restaurant and subsequent conversations with the head chef and key employees revealed a number of innovative projects that qualifies for R&D tax relief but were previously overlooked. Our firms’ R&D tax team, led by Parminder Chattha, prepared a comprehensive technical and financial report to justify the R&D elements of these projects which resulted in over £180,000 in R&D tax relief, received as a cash payment from HMRC.
Jeffreys Henry LLP provide an end-to-end service that makes claiming R&D tax credits easy for you.
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Profit-making SMEs can reduce their corporation tax bill by up to 230%, e.g. an additional £130 deduction on top of £100 spent of qualifying R&D expenditure. Loss-making SMEs can choose to surrender their loss and receive a tax relief by way of a credit – a cash refund paid by HMRC of up to £33,000 for every £100,000 spent on qualifying R&D expenditure.
Rent: you can’t claim on rent but you can claim on the utilities used to power the space you are using for R&D. Hosting: often a cost thought to be claimable but is not a qualifying cost, even if you have specific test servers.
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.
If you are losing money, you can claim back up to 33% of your qualifying development spend in cash. In other words, you can get up to 33p back for every £1 you spend. If you are profit-making, your relief will offset your tax liability up to the amount of tax you owe. A profit making company, startup or SME can even get cash back if its R&D tax credit is greater than your corporation tax liability. In that case, you get the amount you’re owed in R&D tax relief that is greater than your tax liability back in cash. You can get cash back as well if you’ve already paid your corporation tax – often the case when we are filing an amended corporation tax return to cover R&D expenditure for your past financial years.
HMRC generally takes four to six weeks to process a claim after submission.
The use of sub-
You can claim back two financial periods. For example, you can claim as late as November 2017 for a financial year that ended November 2015.
We often work alongside existing accountants. We will prepare a technical report and a claim statement that your accountant can use when submitting your corporate tax return.