Research and Development (R&D)
Research and development (R&D) is a generous tax relief which incentivises and rewards companies undertaking work which is innovative or technologically challenging.
Who Can Claim?
Any UK company can claim the R&D expenditure credit (RDEC) provided they have undertaken a qualifying project. This is regardless of the size of the business or the market sector in which it operates. Small and medium sized businesses can also benefit from the more advantageous R&D SME scheme.
Which Projects Qualify?
Many companies that are performing qualifying R&D projects do not realise that they are eligible for tax relief as there is a common misconception that R&D is only available for ‘blue sky research’ and ‘men in white coats’. In fact, the definition of R&D for tax purposes is remarkably broad and can cover most complex areas of development work.
Any project which seeks to achieve a scientific or technological advance through the resolution of an underlying uncertainty will qualify for the relief. This is regardless of whether the R&D was performed on behalf of a customer or whether the project was actually successful. In addition to more ‘traditional’ R&D, we have seen R&D tax relief claimed on a wide variety of projects. These range from the design of innovative new products and internal software solutions to architects solving complex construction problems and football clubs developing new fitness and performance management techniques.
How Does the Relief Work?
The relief provides an additional corporation tax reduction for the qualifying expenditure incurred. The RDEC scheme provides a tax saving of 9.7% of the qualifying R&D expenditure whereas for a claim under the SME scheme this saving can be as high as 24.7%.
If your company is loss making, it can be possible to surrender the R&D tax relief for a cash tax credit from HMRC which can be used to assist cash flow or to fund additional R&D projects.
How Can We Help?
The Armstrong Watson tax consultancy team consists of qualified tax professionals with significant knowledge and many years experience of helping clients submit R&D claims. We can assist you in identifying which projects will qualify for the relief, ensuring all eligible costs are included in the claim to maximise the tax saving, and submitting the claim to HMRC.
In recent years, we have seen HMRC tighten up their stance on R&D in response to a number of overly aggressive claims. It is therefore more important than ever to ensure that your R&D claim filing position is robust. Our tax consultancy team will deliver considered and proactive from the outset to maximise the value your claim whilst minimising your filing risk.
