What is R&D tax relief?
A corporation tax relief introduced back in 2000 to incentivise innovative UK businesses to invest in R&D and create advances in science and technology.
What is the definition of R&D?
The legislation and HMRC guidance are intentionally not too prescriptive so as not to discourage genuine claims. Essentially R&D is an advance in science or technology, this can be in relation to a new product/process or improvements to an existing product/process.
What is the relief available?
This depends under which R&D scheme you claim:
Tax paying company – tax saving of 24.70%. For example, £24,700 saving for every £100,000 of qualifying expenditure.
Loss making company – tax credit repayment of up to 33.35%. For example, up to £33,350 tax credit repayment for every £100,000 of qualifying expenditure.
Tax saving or repayment of 13% (net 10.53%). For example, £10,530 tax saving or repayable credit for every £100,000 of qualifying expenditure.
How do I know if I claim under the SME or Large Scheme?
In order to claim under the SME scheme, you must meet the following criteria when taking into account all linked and partner enterprises:
- Less than 500 employees and
- Less than €100m turnover or
- Less than €86m gross assets
If the R&D work has been subcontracted to you or has been grant funding you may be unable to claim under the SME scheme but could still make a qualifying large scheme claim.
What is qualifying R&D expenditure?
- Staff costs including gross salary, employers NIC and employers pension contributions
- Subcontractors / Externally Provided Workers
- Consumables including water, fuel and power
Does an R&D project have to be successful and complete in order to make a claim?
No, providing you are seeking advances in science or technology and are carrying out R&D to do so you can claim from the point at which the project begins. The project does not to need to be successful in order to make a claim and you can claim for failed projects.
Is this relief only for science and technology type companies?
This is not just a relief for “men in white coats” and although pharmaceutical and software development companies will make claims, we have made claims in all sectors including manufacturing, property and construction, transport and logistics, hospitality and leisure.
How long do I have to make a claim?
You have 2 years after the accounting period end to make an R&D claim after which time the period is closed for making claims.
Do I have to make a profit and pay corporation tax to make a claim?
No – even if your company is loss making it can still make a claim and receive a tax credit repayment, even if you have never paid corporation tax.
If I have received other grants will this impact the R&D claim?
Potentially, this will depend on the nature of the grant and whether it is classified as notified state aid. Even if you have received grant funding for R&D projects you could still make a claim under the large scheme.
Can sole traders and partnerships claim R&D tax relief?
No – only companies liable to corporation tax can make an R&D claim.
How are R&D claims made?
Claims are submitted through the corporation tax return which will normally be accompanied by a supporting R&D report detailing the qualifying nature of the R&D carried out and quantifying the claim.
How long do HMRC take to process R&D claims and issue any repayments due?
HMRC normally look to process claims within 28 workings days of receipt.
What are your fees for carrying out R&D tax relief claims?
As with most providers we generally work on a contingent “no win, no fee” basis where we take a percentage of the R&D tax saving/credit but only where the claim is successful.