7 Misconceptions about R&D Tax Relief Claims

7 Misconceptions about R&D Tax Relief Claims


R&D tax credits and R&D Tax Relief are the most beneficial schemes for innovative businesses but many businesses refrain from R&D claims due to misconceptions about these schemes. Most businesses are carrying out several qualifying R&D projects but are unaware of them. This blog will discuss such misconceptions and presumptions about the R&D tax credit and R&D tax relief.

R&D tax relief was initiated in the year 2000 by the UK government and the number of claims has been increasing every year since then. It is a valuable source of financial support to boost your business. Following are the presumptions which hold back people from making R&D claims:

1. Only large companies are eligible for R&D claims:

HMRC allows companies investing in the field of research and development and fulfilling prerequisites of R&D claim to claim R&D tax credits and R&D tax relief without any restriction of the company’s size.

There is even a scheme specifically designed for Small and Medium-sized enterprises i.e SME Scheme, which enables small companies to claim R&D tax credits and R&D tax relief. HMRC is even more generous towards Small companies as it allows you to reclaim up to 33% of qualifying R&D expenditure, whereas large companies can only claim up to 13% of their qualifying R&D cost.

To qualify for SME R&D Tax Credits Scheme, the company should be

  • Carrying our research and development project/projects
  • Limited UK based company
  • Have less than 500 employee
  • Turnover limiting to £85 million a year

Hence, the size of your company does not matter.

2. To Make R&D Claim You Should Have an R&D Department or Research Laboratory

According to HMRC’s definition of an R&D project is that should looking for scientific and technical innovation, whether by creating some new product, service, method, or improving some existing service, or product. To meet prerequisites for R&D claims there is no requirement of having a separate R&D department or research laboratory.

3. For R&D Tax Credits, Claim R&D Expenditure Should Be High

In an R&D tax credit claim, you should consider all direct costs related to your R&D projects. Qualifying costs for R&D claims are:

  • Staff costs
  • Subcontractors cost
  • Software license cost
  • Utility Cost
  • Capital Expenditure
  • Consumables cost

After adding all these qualifying costs for the R&D claim most probably you will fall under eligibility criteria for an R&D tax credit claim. Most of the claims are made below £50,000, just make sure to add all the hidden qualifying costs and select relevant schemes.

4. I am a loss-making company so my project won’t qualify for an R&D claim

Under HMRC’s guidelines and eligibility criteria, any company investing in innovation can make an R&D claim via the relevant scheme. There is no compulsion of profit-making for making an R&D claim. You can opt for R&D tax credits to boost your finances and move your business forward. Loss-making companies can re-invest R&D tax credits to accelerate growth.

5. You cannot Claim for failed R&D project

No that’s NOT right, there is no compulsion by HMRC to claim R&D tax credits after the success of your project. If you fulfill the prerequisites of the claim, you are investing in innovation, your face scientific and technical uncertainty, and took experts help to resolve it then it does not matter if you achieved what you were seeking. You fall under eligibility criteria for the qualifying costs against that failed project.

6. HMRC’s Enquiry

Many businesses do not make R&D claims due to fear of HMRC’s enquiry. We agree that convincing HMRC for your eligibility via technical narrative requires a lot of effort and b HMRC’s enquiry is very arduous to pass through but this risk is worth taking. You can easily avoid HMRC’s enquiry by creating a compelling and comprehensive technical narrative.

Due to the increase in fraudulent claims in previous years, HMRC has increased enquiry but thankfully to save rightful claimants going through complications of enquiry HMRC has announced an additional CT600L form which demands details regarding your project. It will save you from the arduous task of enquiry and avoid the complexities of filing claims you can contact our R&D tax credits experts.

7. R&D Tax Credit Claims Process is Complex & Time Taking

R&D tax credit claims may seem arduous and time taking but you can consult R&D tax credit experts. R&D tax credit claim requires proper understanding before starting the process.

 Our R&D tax credit experts first make you go through the whole process of the claim then find hidden qualifying expenditures to maximise R&D tax credits. Feel free to contact us to find out more about R&D claims.