Introduced in 2000 and pledged to run until 2032, the R&D Tax Credit scheme is part of an EU-supported initiative to promote innovation across the UK and Europe. R&D tax credits enable companies that incur costs in developing new products, processes or services to receive a cash payment or tax deduction.
The two key criteria in determining who is eligible for R&D tax credits are ‘innovation’ and ‘uncertainty’.
A basic definition of R&D is to “work to resolve scientific or technological uncertainty aimed at achieving an advance in science or technology”. This can include new or developed products, services or processes.
The tax relief on allowable R&D costs incurred on or after 1 April 2015 is 230% therefore, for each £100 of qualifying costs, your company could have its Corporation Tax profits reduced by an additional £130 on top of the £100 spent.
If instead there’s an allowable trading loss for the period, this can be boosted by 130% of the qualifying R&D expenses. This loss can be utilised in the normal way or ‘sold’ to HMRC for a cash sum.
R&D credits may be claimed in respect of any sum. The previous minimum limit of £10,000 has been removed. The maximum that may be claimed is 7.5m for any one project. However, the claim must be made within two years of the end of the accounting period in which the R&D expenditure was incurred.
For further information please contact us on the below details or call in for a chat.
R&D revenue expenditure includes:
Our R&D team is headed up by Partner, Alex White.