Research And Development Tax Credits – Are You Eligible?

WHAT IS RESEARCH & DEVELOPMENT (R&D) RELIEF?

R&D Relief is a valuable government tax relief that rewards companies in the UK for investing in innovative projects, which lead to an advancement in the field. This can help qualifying companies to either reduce their tax liability or increase taxable losses.

HOW CAN I GET R&D RELIEF?

If your business is undertaking R&D activity in relation to a specific project (even if the project is unsuccessful in the end) and the R&D activity meets the definition of qualifying R&D, then you could be eligible for this additional tax relief.

The definition of qualifying R&D is purposefully broad.

Whatever the size or sector of your company, if your company is taking a risk by attempting to ‘resolve uncertainties’, then you may be carrying out qualifying activity.

If these conditions apply to your project, you can claim R&D tax credits on day-to-day costs and qualifying expenditure, including costs for staff, subcontractors, materials, software and utilities.

Relief can be as much as 230% of qualifying R&D costs if you are a small or medium sized enterprise.

“Qualifying Activity”:

• Creating new products, processes or services.
• Changing or modifying an existing product, process or service.
• Activities aimed at obtaining new knowledge.
• The search for alternatives for materials, devices, products, processes, systems or services.

HOW MUCH CAN I CLAIM?

If you fall under the definition of a small and medium sized enterprise (SME) you can deduct an extra 130% of qualifying costs from annual profits, in addition to the normal 100% deduction – making the total deduction 230%

If the company is loss making you can claim a tax credit worth up to 14.5% of the surrenderable loss

Large companies can claim a Research and Development Expenditure Credit (RDEC).

The RDEC is a tax credit for 11% of your qualifying R&D expenditure.

Definition of an “SME”:

• Less than 500 Staff
• Annual turnover not exceeding £100m or an annual balance sheet figure not exceeding £86m

HOW WE CAN HELP:

We help companies across all sectors with claiming R&D relief, leaving them with more cash to re-invest into their business.

Our Team of Chartered Tax Advisers ensure you have a robust claim that identifies qualifying R&D and the associated costs.

We can assist in preparation of the R&D claims and submission of the claim to HM Revenue & Customs.

We handle the R&D Claim from start to finish & we produce the technical report on your behalf that helps R&D Tax inspectors understand your work and approve the claim

FOR EXAMPLE…

XYZ Ltd had annual profits of £200,000 and qualifying R&D expenditure of £65,000 in the financial year 2016/17. How much R&D relief do they get?

• Qualifying R&D expenditure identified by RDTaxCredit.org.uk – £65,000
• Deduct from annual profit – £200,000 – £65,000 = £135,000
• Additional R&D Relief – £65,000 x 130% = £84,500
• Revised taxable profits for 2016/17 – £135,000 – £84,500 = £50,500
• Total R&D credits. 230% – £65,000 + £84,500 = £149,500
• Previous Tax Payable (19%) – £38,000
• Revised Tax Payable (19%) – £9,565