Research and Development (R&D) tax relief was introduced in 2000 to encourage UK corporations to invest in innovative projects which seek to achieve an advance in science or technology through the resolution of scientific or technological uncertainty.
Small and medium companies which make successful R&D claims will usually receive an additional tax deduction of 130% of the relevant costs incurred, giving a total deduction of 230% of the original costs. If the SME incurs a trading loss in the period in which R&D tax relief has been claimed, it can surrender all or part of that loss for a repayable tax credit of 14.5%. The definition of what counts as a relevant ‘science or technology’ project is very broad and potential claimants are often confused as to what is and is not covered. Examples of activities which may qualify for R&D claims include, but are not limited to, manufacturing an item, developing software, employing or sub-contacting in engineers, scientists or software developers, carrying out design work, filing for patents and so on.
Common areas of overlooked qualifying R&D expenditure include:
- unsuccessful and internal projects
- expenditure where there is not a new product - R&D can be related to changes or modifications of an existing product
- R&D that does not relate to products - R&D expenditure can also be relevant to services and processes
If you are not sure whether your project would qualify for an R&D claim, talk to us.
Working with our tax team, we can review the work you have carried out and analyse whether a claim is likely to be successful or not. We will then submit your tax return on your behalf, along with the R&D claim. R&D claims are made retrospectively, with a time limit for submission of two years from the end of the relevant accounting period.
R&D claims are a highly complicated area of taxation, causing many businesses to be put-off from trying to claim them. However, they can be very worthwhile in pursuing with many of our clients saving thousands of pounds (and in one case one of our clients successfully saved hundreds of thousands of pounds).
Require more information?
If you would like more information or would like to speak to us direct then call us on 01706 860255. Or if you would prefer, ask us a question online.