About R&D tax credits

 

R&D tax credits are a valuable government tax incentive created to reward companies who try to achieve something technically challenging. Their goal is to reward past and encourage future R&D spending, benefiting industry and the UK economy. R&D tax credits can reward profitable companies with a generous corporation tax deduction or provide loss making companies with a sizeable cash repayment.

They are available to any company in any sector.

SME relief

An SME is a company with fewer than 500 employees and either less than €100m turnover or less than €86m gross assets.

The majority of UK companies will fall within this category. Under the SME scheme it is possible to claim back up to 33p for every £1 spent on R&D activities.

SME companies can receive a cash payment even if they are not profitable.

Large Company relief

A large company is defined as being a company with more than 500 employees and either turnover which exceeds €100m or gross assets exceeding €86m.

A large company is not permitted to make an R&D claim under the SME scheme but may do so under the Research and Development Expenditure Credit (RDEC) Scheme.

Under this scheme large companies can claim back up to 8.8p for every £1 spent on R&D activities.  This can be claimed whether the company is profit making or not.

Do I qualify?

 

More companies qualify for the relief than you may first think. You do not need to be in bright white lab coats undertaking cutting edge research to make a claim. This is the biggest misconception surrounding R&D tax credits.

You simply need to demonstrate that your company has taken a risk by showing that you were faced with challenges that required additional efforts to overcome.

You can make a claim if your company has tried to achieve any of the following:

Create

Creating new products, processes, software, services or devices.

Improve

Making appreciable improvements to existing products, processes, software, services or devices.

Duplicate

Duplicate an existing product, process, software, service or device. For example, trying to reproduce a competitors breakthrough.

Think of an R&D project as a journey.  If at the start you were faced with challenges where solutions were not readily deducible by your technical team, and there was no publically available information which could be directly used, the work you undertake trying to find solutions to these challenges could qualify for research and development tax credits.

The project doesn’t even need to be successful. If you could not find a solution to these challenges and the project failed you can still make a claim.

What can I claim?

 

The expenses your company incurs in trying to overcome these scientific or technical challenges can form the basis of an R&D tax credit claim.

The following cost categories may be included:

N

Expenditure on staff including gross salaries, employers NIC and employers pension contributions.

N

Expenditure on agency workers.

N

Expenditure on subcontracted R&D activities.

N

Expenditure on consumables and materials (including heat, light, power and water).

N

Software.

How much is my claim worth?

 

The amount you can reclaim is dependent on whether you are an SME or a Large Company.

To qualify as an SME for R&D tax credit purposes your company must have fewer than 500 employees and one of the following: Either turnover of less than €100m or gross assets of less than €86m.  A large company is one which breaches the above thresholds.

SME's

 

 

Large Companies

 

 

See if you could claim?

 

Lime R&D

The R&D Tax Credit Specialists

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Lime R&D is a firm of Chartered Tax Advisers.

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