R&D (Research & Development) is a tax relief scheme which was introduced by the Government in 2000 to help and reward innovative businesses thus allowing them to progress.
What is R&D?
R&D takes all allowable expenditure incurred during the R&D project and allows you to gross it up by 130% meaning you can effectively deduct 230% of relevant costs from your profits. This equates to more than double of the allowable expenditure incurred.
Qualifying expenditure includes raw materials, staff costs, subcontractor costs and apportionments of overheads that are relevant to the R&D project. Loss making companies also benefit as they can opt for a cash payment of 14.5% of the losses made which increased from 11% as of 1st April 2014.
The R&D claim is submitted with a written report outlining why the project(s) undertaken qualify for R&D and backing schedules with details of costs incurred.
How far back can you claim R&D tax relief?
You have two years from the end of your accounting period to submit an R&D tax credit claim for any qualifying expenditure that you’ve identified during that period. This is because R&D tax credits are a Corporation Tax relief and the deadline for amending your Corporation Tax return is typically 24 months after the end of your accounting period.
Who qualifies for R&D?
The main requirement for a successful R&D claim is that your company is undertaking work which seeks to achieve an advance in science or technology.
The activities that directly contribute to achieving this advance in science or technology through the resolution of scientific or technological uncertainty are also eligible for R&D relief.
The common misconception is that the R&D tax relief only applies to those companies working in a scientific sector. In actual fact any sector could qualify for R&D relief if they can prove the project lead to an improvement in that field.
Here are some examples:
- Food & drink
- Electronics and Electricals
- Software & IT
- Chemicals & Glues
- Waste Recycling Plants
- Video Games Development
If you think your company could be eligible for R&D tax relief, there are a number of things that we can help you do in order to maximise your R&D claim.
- Collecting information on what R&D projects you have done or will be doing so that we can advise whether you qualify for R&D relief.
- Establish what costs were incurred during the R&D projects and ensure you have the evidence for these in the event that HMRC request further information.
If you would like to speak to us regarding R&D tax reliefs and whether you would be eligible, please contact us using the details below: