The inside guide to R&D tax relief
Whilst many businesses might think that R&D tax relief doesn’t apply to them, the truth is that many are eligible to benefit from it - and they are missing out on hundreds-upon-thousands of pounds each year.
Incentivising businesses to become more innovative
R&D tax credits are a form of tax relief introduced by the Government in 2000 to encourage research and development amongst UK businesses as a means to reward this innovation.
The UK has one of the most generous schemes around, with an estimated £6 billion per annum available to SMEs alone.
There are two schemes in place, one for SMEs and the other, for large businesses.
- SMEs can benefit from a super deduction of 230%.
- Pre 1 January 2018 Large businesses benefited from a super deduction of 230% or tax credit of 11%.
- Post 1 January 2018 Large businesses benefit from a tax credit of 12%.
SMEs obtain relief via a reduction in profits or an increase in losses which can be offset against PAYE liabilities and surrendered as a cash repayment. Post April 2016 the uplift in costs can no longer be claimed by large businesses as only the tax credit is available.
Whether you’re an SME or a large business and are spending money on Research and Development, you could be entitled to receive a reduced tax bill, or even a cash repayment.
Is my business eligible for R&D tax relief?
Not sure whether or not you qualify to receive a slice of these generous R&D tax incentives? Ask yourself:
- Have you developed your own software, IT solutions or products?
- Do you manufacture products?
- Have you improved or sought to improve your processes or the efficiency of your services?
- Do you regularly change the way you make your products?
- Have you tried to resolve technical product or process challenges?
If you’ve answered ‘yes’ to any of these questions, then you could qualify.
How do I know what I can claim?
R&D for tax purposes covers a much broader range of activities than you might think and is applicable to all industries.
Knowing what you can and cannot claim can be somewhat of a minefield. We have worked alongside numerous businesses to successfully claim tax relief, from the following sectors to name but a few, and would welcome the opportunity to help you assess the eligibility of your claim.
- Marketing & Event Management
What about projects that have stalled?
They may still count. R&D tax relief also applies to activities, projects and internal processes that didn’t initially work out quite how you wanted them to.
Do my ideas count?
Yes. Any time spent discussing or developing your next big idea and the subsequent costs can be eligible for tax relief, even if you didn’t finish what you set out to achieve.
What about if I haven’t got the time or expertise to sort my claim?
We can help. One of our experts will have a free initial discussion with you to generally assess your eligibility and see whether you could also benefit from other tax breaks such as Patent Box.
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Mark has more than 13 years of experience as an accountant and tax practitioner and is a member of the Chartered Institute of Taxation (CIOT) and a fellow of the Association of Chartered Certified Accountants (ACCA)