What are R and D Tax Credits and How Can You Make R and D Claim?
What
What are R and D Tax Credits?
Activities that aim to bring innovation by creating some new products or services are categorized as Research and development (R&D). This blog intends to elucidate R and D tax credits for you.
R and D Tax Credits are an initiative by HMRC to support innovative businesses. As research and development play a vital role in the UK’s economy, UK’s government took this initiative to help businesses working on research and development flourish. Eligible businesses can get up to 33% of their qualifying cost via R&D claim. Usually, R&D is not carried out with an expectation of immediate advantage or profit, that’s why additional funding through R and D tax credits or R&D tax relief can be very beneficial to move your business ahead. You can use credits you receive through R&D claim to invest in accelerating your R&D, hiring new staff, and ultimately growing.
Who is Eligible to Make R&D Claim?
It does not matter what domain or industry you belong to, or whatever is your company’s size, if your project involves research and development and aims to bring advancement in technology then you fall under the category of R&D. Many of the projects of various domains fulfill the prerequisites of R&D unknowingly that’s why it is better to take R&D specialist’s advice and consultation.
Any UK based company fulfilling the following prerequisite is eligible to make an R&D claim:
- Carried out qualifying R&D activities.
- Spending money on modification of existing processes or products.
- Investing in the development of new processes, products, or services
- If your project has faced technical or scientific uncertainty and attempted to overcome it.
If a company falls under this criterion set by HMRC then it is eligible for an R&D claim to receive R and D tax credits in the form of payable cash or R&D tax relief. If you are still unclear about your eligibility you can consult our R&D specialists.
What Qualifies as R and D?
To make an R&D claim it is important to identify activities and costs which qualify for R&D. You can claim for every cost directly affiliated with R&D activities from the day project started to the day it ends. You can also claim for subcontractors and items you bought.
You can claim the following qualifying costs while pursuing an R&D claim:
- Staff costs for the ones who worked on an R&D project, including salaries, pension contributions a
- Up to 65% of subcontractor’s cost
- Project-related software licence costs
- Materials, equipment, and utility expenditure
- Developing/ manufacturing process cost
- Cost of training required to carry out research or project
- If your project needed clinical trials then you can claim for payment done to the subjects for the trials.
You can claim the cost spent in the last two financial years.
Which Scheme Should You Choose? SME or RDEC?
You can pursue R&D Claim via scheme you fulfill prerequisites of:
SME
SME’s are small or medium-sized enterprises with:
- Employees: Lesser than 500
- Turnover: lesser than £100 million or
- Balance sheet: Lesser than £86 million
Loss-making SMEs can claim up to 33% of their qualifying costs whereas profitable SMEs can claim up to 25% of their qualifying costs.
RDEC
This scheme is for larger companies with:
- Employees: more than 500
- Turnover: more than £100 million or
- Balance sheet: more than £86 million
Larger companies whether they are profitable or loss-making can claim up to 11% of their qualifying expenditure.
How Can You Claim R and D Tax Credits?
Whether you are claiming yourself or via an R&D specialists, to claim R and D Tax Credits you are required to produce a technical narrative justifying your project’s eligibility. Your report with all the financial calculations of R&D expenditure and CT600 form will be submitted to HMRC. HMRC will process your claim within few weeks and if your report meets HMRC’s requirement you will receive your R and D tax credits.
You can pursue your R&D claim yourself and can also take help and assistance from R&D specialists who can help you meet criteria, also tailor an R&D claim report for you and submit it on your behalf. Talking help from R&D specialists can reduce the risk of faults in a technical report and can help you deal with HMRC’s inquiry.
How Can Our R&D Specialists Help You Claim R and D Tax Credits?
We value your input in innovation that’s why we help your businesses transform with R&D incentives. Identifying R&D expenditure may seem simple but it is not and if it is not done by R&D specialists you might miss out on qualifying costs resulting in a lesser value of the claim. Our R&D specialists help businesses of all sizes and domains meet the criteria of R&D claim with a maximum value of R and D tax credits. Our team of dedicated R&D specialists is committed to deliver the value of the claims more than your expectations.