Research and Development tax credits, commonly referred to as simply ‘R&D’ is a government incentive designed to drive forward innovation across multiple industries.
This is an opportunity for you to reduce your corporation tax bill or receive a refund from HMRC based on the working hours your business dedicates to R&D.
The criteria can include costs that are incurred as a result of significantly improving existing technologies, systems and processes. That is incredibly broad and could apply to a lot of businesses. Also, your claim could also include a wide range of related costs, including the payroll cost of the people involved in the R&D work.
What are the criteria for R&D tax relief claims?
Just as with capital allowances, we often find that R&D tax credit is under claimed because business don’t think they meet the criteria, which means vast numbers of business are missing out on some quite significant tax relief.
But the criteria are in fact very wide. R&D tax relief is available to any business that invests resources into research and development. The question is, what business activities qualify as research and development?
To list every possible project that could qualify for R&D tax relief would make this page rival the page count of that of Leo Tolstoy’s War and Peace. However, according to the gov.uk website, to get R&D tax relief you need to explain how a project:
- Looked for an advance in science and technology
- Had to overcome uncertainty
- Tried to overcome this uncertainty
- Couldn’t be easily worked out by a professional in the field
SMEs and large companies may also be able to apply for Research and Development Expenditure Credit, if they’ve been working on an R&D project for another company e.g. as a contractor.
As you can see, those four criteria are very broad in nature and could apply to all sorts of businesses working on all sorts of ideas, products and services. If you’re not sure they apply to you, give us a call and we’ll determine that for you.
What is SME R&D Relief and can I claim for it?
There is also something called “SME R&D Relief” to consider.
According to gov.uk, if you’re a small or medium sized enterprise, you might be able to claim SME R&D relief if you have fewer than 500 staff a turnover of under €100m or a balance sheet total under €86m.
Providing these criteria are met, you could save thousands in tax relief. From our experience, the criteria can often be met in seemingly unlikely projects.
For example, one of our clients, a large insurance provider, grew tired of using off-the-shelf Customer Relationship Management (CRM) systems that weren’t quite right for their business.
So, they decided to design their own piece of software from scratch. Upon learning about this, we informed the client that such an activity was likely to qualify them for R&D. The result we ultimately achieved for them meant that instead of the client paying HMRC £15,000, HMRC paid them £25,000.
Next Steps
If you’ve read this far and think you may be eligible, then simply get in touch. Our process starts with learning about your business and the nature of the projects it is involved in. Once we’ve established a thorough understanding of your business and its activities, we can review and identify areas that qualify you for R&D tax credits.
You really could be missing out on thousands of pounds of tax savings, or even a cash refund! To take the first step, contact us today.
