The R&D tax relief scheme was introduced in 2000 to encourage innovation and global competitiveness by allowing UK companies to reclaim money invested in research or development, through the UK tax system.
R&D for tax purposes does not involve scientists in lab coats. HMRC’s interpretation of an R&D project is:
- aiming to or achieving an advance in science or technology,
- by overcoming technological or scientific uncertainties,
- that are not readily deducible by a competent professional.
- Staff costs to include salary, employer’s national insurance contributions and employer’s pension contributions. This does not include dividends.
- Materials and consumables including light, heat and power.
- Outsourced work or agency staff.
- Software used directly in the R&D, such as CAD systems.
- Clinical trial costs to include payment to volunteers for testing.
An R&D tax claim will either reduce your corporation tax bill or increase tax losses.
By reducing the tax bill, you will either pay less tax on your next payment date or get a refund of tax already paid.
Increasing tax losses will enable you to either :
- carry back tax losses to use against the previous year’s taxable profits
- carry forward tax losses to use against subsequent taxable profits
- set against profits of other group members
- surrender losses for a cash payment
You can go back two full financial years.
Yes, the outcome of the project is irrelevant for R&D tax relief purposes.
The rules surrounding subcontractor costs in an R&D tax relief claim are complex. The subcontractor could be undertaking all or part of the actual R&D work or could be used only for testing purposes. The subcontractor does not need to be in the UK.
Under the SME scheme, the amount claimed for subcontracted costs is restricted to 65%. This is however not the case when the SME is connected to the subcontractor, where potentially 100% of the cost be may be claimed.
A company is connected to a subcontractor when they are both under common control, which generally means one company owns more than 50% of the shares of the other.
Yes. As the process does require understanding of the tax system and the guidance provided by HMRC runs to several hundred pages, it usually puts companies off completing their own claim. There is a risk of under or over claiming costs, claiming unqualifying projects and risk an HMRC investigation. By allowing GrowthPad to undertake the claim on your behalf, you drastically reduce your risk as we are R&D tax specialists.
No. This is a Government scheme fully supported by the Treasury and HMRC.
We undertake most of the work. For your first claim, we try to keep your involvement to two hours and subsequent claims up to one hour.
Larger claims involving numerous projects will often take longer than smaller claims.
Firstly, we have quick chat over the phone, if you qualify we will have a more in depth conversation with you and/or your development team. We then prepare and submit your R&D tax credit claim.
It normally takes HMRC up to four weeks to process the claim and issue any refunds.
From 1 April 2015 to 31 March 2017, profitable SMEs can recover up to 26% and from 1 April 2017, profit making SMEs can claim up to 24.7% of costs. Loss making SMEs can claim up to 33.35% of costs. Large companies can claim back up to approximately 8.9%.
Yes, there are two schemes for R&D tax relief. One is for SMEs and the other is for large companies, which is known as research and development expenditure credit (RDEC).
An SME is a company of up to 500 people with revenues of less than €100m or balance sheet assets of less than €86m. A company not meeting this is a large company.
It is often assumed that using an accountant is the most appropriate choice, as the incentive is utilised using the tax system. However, the claim consists of both a technical aspect and a financial aspect, with 75% of the claim towards the technical.
Most accountants do not have the technical knowledge to be able to understand your projects, how the development took place or the industry alternatives. They therefore inadvertently underclaim costs.
As R&D tax specialists, we are able to identify qualifying projects and often find that we have been approached by a client that was advised by their accountant that they did not qualify. Contact us for a free quick assessment.
A company can claim both a grant and R&D tax relief, but the type of relief available may be restricted.
A grant can be notified or non-notified. It is important to establish the type of grant received as it will affect the treatment of the R&D tax relief.
The SME R&D scheme is treated as notified State Aid. As a consequence, a company can not get both SME tax relief and notified State Aid for the same R&D project. The company can instead claim R&D tax relief under RDEC.
The treatment of receiving non-notified State Aid or any other type of subsidy for an R&D project is different. The company could claim under both the SME scheme and RDEC. Any expenditure that has been subsidised by a grant or subsidy will fall into the RDEC and the balancing R&D expenditure will be treated under the SME scheme.
We work on a no win no fee basis and only invoice you once you have a successful claim.
Yes – we will offer you a generous referral fee in return. Contact us for more details.