What is R&D tax relief?
It’s surprising how many companies believe they don’t carry out Research and Development, even if they do they aren’t always aware that they may be able to claim some tax relief. There can be huge benefits to claiming this tax relief so it’s advisable to talk through the options with a taxation specialist.
Tax relief for Research and Development dates back several years in the UK and similar structures are in place around the world. A substantial number of companies have previously missed out on claiming what is a generous form of tax relief.
The UK Government actively encourages investment in Innovation and Research and Development as it is a central component of business growth and therefore encourages R&D claims for tax relief.
Some organisations are put off from looking at this as they assume it is only available to hi-tech or science based industries, this is not the case.
Claims can be made for innovation in new products and in some instances for substantial modifications in processes or products therefore opening up claims to many different business sectors.
The Criteria for Research and Development Tax Relief
The type of expenditure incurred on activities relating to R&D needs to be considered and can fall into different categories such as; employment costs, work done by externally provided workers, software, costs of materials and any clinical trials.
To receive R&D relief you need to explain how a project:
- looked for an advance in science and technology
- had to overcome uncertainty
- tried to overcome this uncertainty
- could not be easily worked out by a professional in the field
Determining which projects might qualify for R&D relief and what activities can be taken into account does require some professional advice, something Rayner Essex is able to provide.
Making a Claim
Organisations are able to claim tax relief in the period when the expenditure was incurred. The relevant criteria has to be established and this usually requires professional guidance from taxation specialists. This ensures the application is both relevant and ultimately successful. There is an Advanced Clearance Service offered by HMRC that can be useful.
Depending on the size of the organisation, there are different types of R&D relief:
If a business has less than 500 staff; or a turnover less than 100 million Euros; or a balance sheet under 86 million Euros, a claim can be made through ‘SME (Small and Medium-Sized Enterprises) R&D Relief’. Larger companies can claim a ‘Research and Development Expenditure Credit’ (RDEC). In all instances substantial tax relief is available for qualifying projects.
It is important to note that R&D relief is only available to companies and not individuals or partnerships, irrespective of their size.
How We Help Clients
We have a highly regarded tax team that specialises in making R&D claims on behalf of our clients across the UK.
Initially we will consider your business activities and any areas that you feel might qualify for relief and we will then help determine whether or not your claim will meet the qualifying criteria.
Thereafter we will assist you with making the claim.
For our international clients we are able to provide support through our membership of Inpact International, a global alliance of accountancy firms.
Download R&D Guide
For a handy guide on Research and Development tax relief, click below.