Answers to Frequently Asked Questions about R and D Tax Credits
R and D tax credits is a tax relief scheme introduced by the UK government in 2000, to promote advancement in the Research and Development industry. It was initiated to encourage more businesses in the UK to invest within the domains of technology and science. The government, through HMRC, rewards various multi-sector businesses. It does so by returning the cost for any R and D project, in the form of R&D tax credits or R and D tax relief. Businesses are thus motivated to venture more into the field of research and development when their R and D tax credits are being provided for, ultimately resulting in the advancement of the UK in fields of science and technology.
FAQs about R and D Tax Credits
1. What are some important eligibility questions?
Claiming for R and D tax credits comes with specific prerequisites, as underlined by HMRC. It is therefore important for you to consider certain key eligibility questions that help you understand the qualification of your project for the R&D tax relief:
- What did the project seek to advance in the field of science and technology?
- What was the state of knowledge or information before the project, or, through what means the project has advanced existing information?
- What were the details of the R and D project, and how does it look on a larger commercial front?
- What were the anomalies in science and technology which required to be resolved through the advancement?
- Why an adequate professional in the relevant field was unable to deduce the capability or knowledge sought in the R and D project?
- When and how were the uncertainties resolved in the project?
- What were the costs of the rectification of these uncertainties?
These questions to consider are based on the guidelines set by the HMRC. They form a crux of the usually lengthy rules, however, by being able to consider and answer these questions you will be able to understand the eligibility criteria for your project when claiming for the R and D tax credits. By being able to describe the advancement in science and technology and the gaps, or uncertainties, in the knowledge of the specific field sought for in the project, you will be able to form the base of your R&D tax relief claim. If any doubt still exists, then our R and D tax credits consultants are readily available for your guidance and help.
2. Can loss making companies claim for R and D tax credits?
Yes. Loss making companies can claim for R&D tax relief, which is beneficial for the business. It ensures cash flow to curb heavy loss and keep the project in operation. Losses are met with a crediting valuing of 14.5%, so that can be helpful for your business. However, only the losses incurred by the R&D projects can be exchanged instead of losses from any other venture.
3. Can traders and charities claim R and D tax credits?
No. The R&D tax relief scheme is for businesses pursuing advancement in the fields of science and technology. The company claiming must be corporate, and liable for corporation tax of the UK. This includes overseas branches of UK companies as well.
4. Can I claim for R and D tax credit during the development of an eligible project that did not finish before the end of the accounting period?
Yes. If the project was underway during the claimable period and all eligible R&D actions were taken, then you can claim for R&D tax relief.
5. How is the R and D tax credit paid by HMRC?
Usually, HMRC processes a claim in 28 days. Payment following the processing takes up to 14 days. This is subject to the HMRC opening an enquiry, which may extend this interval.
6. How many times can R and D tax credits be claimed?
There is no restriction on the number of times R and D tax credits can be claimed. R&D tax relief is claimed in each accounting period, where the company undertakes eligible activities of R&D. So, there can be multiple claims for R and D tax credits.
7. What is the time limit for a claim?
You can claim for R and D tax credits for 2 years after the end of your company’s accountability interval. For example, if your fiscal year ends on 10th September 2021, then you can claim for the R&D tax relief till 10th September 2023. This claim can also be altered within this time frame.
8. What costs can I claim for R and D tax credits?
You can claim R&D tax relief for the following costs:
- Staff costs: the cost of employing (which includes employee salary and insurance etc.)
- Consumables: the cost of materials consumed by the R&D project.
- Subcontractors: the cost of subcontractors can be claimed under the RDEC scheme, according to which, a company can claim for R&D tax credits in avenues where the subcontractors are not permitted to claim- such as the subcontractors being a person or university.
- Software: the cost of software used in the R&D project (such as Microsoft subscriptions etc.)
- Externally provided workers and volunteers.
9. Is an R and D tax credit claim worth it?
Yes. In the field of research and development, there is no guarantee of an instant success of a project, as there is a significant amount of risk involved. So, R and D tax credit can help your business strive under difficult circumstances and ensures cash flow, thus facilitating your R&D project without any hindrance.
In case you have questions beyond this article, please refer to our R&D tax relief consultants who are ready to provide you with the most competent and professional consultancy. Our team of professionals guarantees maximum R and D tax credits so that your contribution in the field of R&D does not become futile.