A Guide to Research and Development Tax Relief

If your company has carried out any research and development (R&D) work, or you have worked for a company on its R&D project, you may be able to claim Research and Development Tax Relief. This guide will help you decide whether you qualify.

Do I qualify for Research & Development Tax Relief?

The Government has set aside a £1.5 billion yearly budget for tax relief for research and development activities.

The parameters are as follows:

  • You must be developing something in the field of science or technology
  • The project must be commercially innovative
  • The project will need to involve technology or science that is not readily available in your particular industry
  • The project will have to relate to your company's trade, in other words, you must have the intention of using the findings for your business
  • Your company must not already be receiving state aid or subsidised expenditure

What can I claim R&D Tax Relief on?

To qualify, all expenditure that you intend to make a claim on must be related to daily running costs. Capital assets do not qualify.

The expenses will also need to fit a category from a set list. These include materials, software, consumables and staff costs.

How do I go about claiming R&D Tax Relief?

Your claim will need to be made within two years of the end date of the related Corporation Tax accounting period. Your claim can be made in your Corporation Tax return or via an amended return.

You will need to provide supporting information as to how your project meets the HMRC criteria of research and development; of how it looked for an advance in technology or science and aimed to achieve it, and how it had to overcome technological or scientific uncertainty and how this was overcome.

There are two schemes under which a claim can be made.

The first type of relief claim is the Small and Medium Sized Enterprises (SME) Scheme. The second is the Research and Development Expenditure Credit (RDEC) Scheme.

The SME Scheme is aimed at small and medium sized businesses which for the purposes of the R&D Tax Relief means those with less than 500 employees and with either an annual turnover of up to £100 million or a balance sheet under £86 million.

The RDEC Scheme is designed for subcontractors working via their own limited company. If your company is involved in a contract with a large corporation to undertake research and development work where the corporation will retain the intellectual property rights, you may be able to claim through this scheme.

If you believe that you may be in line for Research and Development Tax Relief, why not talk to us to see if you qualify? If you do then we'll be able to guide you through the next steps.

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