R&D is one of the most lucrative tax reliefs promoted by the UK government.
It rewards companies who invest their resources into developing new or improved products, systems, and services, which seek to appreciably improve existing knowledge or technology within their field.
Is my business eligible for R&D Tax Relief?
R&D tax relief is available to all companies subject to corporation tax who are undertaking qualifying activities.
The stereotype is that R&D companies are those with “lab technicians in white-coats”, but the definition extends much further than that.
What qualifies as an R&D eligible activity?
To qualify, a company must be able to demonstrate that it has:
- Attempted to overcome technically challenging aspects to a project i.e., complex technical designs, new software solutions, new formulations, or even new processes,
- A competent professional could not easily deduce the solution i.e., the solution is far from simple and can’t just be “off-the-shelf”.
- The final solution aims to appreciably improve the knowledge, science, or technology available within their respective fields i.e., how is the final product better than competing products on the market?
Many R&D projects may never become a commercial product, despite this, but these “failed” projects can still qualify for this tax relief.
How R&D Tax Relief is applied
The UK currently operates 2 regimes, with a company’s size typically determining the relevant regime.
- The Small Medium Enterprise (SME) regime and,
- The Research and Development Expenditure Credit (RDEC or large company) regime.
The mechanics behind both reliefs are very different.
The SME regime
Qualifying companies receive an additional (super) deduction of 130% against their profits, so with every £10,000 of qualifying expenditure your company benefits from £4,370 of tax relief!
The RDEC regime
When claiming under the RDEC schemes a tax credit of 13% is applied to the qualifying expenditure, with the overall tax benefit amounts being 10.53% of the overall expenditure.
How can we help?
- Determining whether your company can qualify for the relief.
- Maximising and quantifying your claim, including a review of previous claims in time to be refiled.
- Building close working relationships with your finance and technical teams.
- Preparing robust supporting evidence and reports to support your claim.
- Submitting your claim in current or amended corporation tax returns.
In the past two years alone, our team has secured R&D tax relief in the region of £6m for our clients.
Although Research and Development tax relief is by far the most common and widely used tax relief in operation there other reliefs available to companies in creative sectors learn more.
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