However, uptake of R&D tax relief is haphazard, with claims that the system is hard to navigate and understanding of eligibility criteria far from universal. Here, we answer some of the questions we get asked most frequently about R&D tax credits, including who can apply, what the conditions are and what it might mean to your company.
The R&D tax relief scheme is split into two strands:
Companies can apply for one or the other of these options as long as they can provide evidence that they have undertaken or invested in qualifying R&D projects.
There is no clearly defined list of project types that are eligible for claiming tax credits against. Instead, HMRC rules specify two criteria:
The key to successfully claiming R&D tax relief is therefore being able to demonstrate that your project meets these criteria.
No. Businesses are entitled to claim R&D tax relief even when they have come up with no resolution or the project has not been completed, as long as they can demonstrate investment and that the project meets the above criteria.
SME R&D tax relief is claimed back against your Corporation Tax bill. In some circumstances, it may be paid as a tax credit. There is a long list of expenses you are allowed to claim for, including employee salaries, contractor and consultancy fees, material and equipment costs and so on – the key criteria being that all costs relate to the R&D project.
The R&D Expenditure Credits scheme works as a payable credit against a company’s PAYE/NIC liabilities and relates only to staffing overheads for employees engaged in projects.
According to the rules of the SME scheme, companies are allowed to make the normal 100% deduction of qualifying expenses from their Corporation Tax bill, plus another 130% – making a total of 230%. In real terms, that usually means you can get up to 33% of your costs back. If your company is loss-making, you can claim back a tax credit of up to 14.5% of the surrenderable loss.
Under the R&D Expenditure Credits scheme, companies can claim a credit of up to 12% of qualifying expenditure.
Kay Johnson Gee has a team of award winning R&D tax relief experts headed up by Tax Partner, Alex White, we can complete a claim on your behalf, for either a percentage or fixed fee. For a no obligation chat call 0161 832 6221 or contact us here.