R&D Tax Explained

The research and development tax scheme in the UK allows companies to claim back tax in the form of cash or a credit towards a corporation tax bill.

The tax credit is a form of government subsidy, designed to encourage companies to invest in research and development activities to develop better products, materials, chemicals, technologies and services.

This tax credit is open to UK companies of all sizes who are registered for Corporation Tax and companies can claim even if they are not currently profit-making.

R&D tax credits enable companies to get funding from the government which can then be spent on anything.

For some companies, this provides an instant improvement in cash flow. Other companies choose to spend this money on growing their business, hiring new employees or boosting their marketing budget. For loss making companies, this money comes in the form of a cash payment from HMRC. For profit making companies, the money comes from a reduction in their Corporation Tax payment.

The UK government have purposely left the definition of Research and Development Tax Credits wide to encourage UK businesses to spend money on creating better products and services.

Any UK based company in any industry could potentially claim back R&D. The scheme sets out guidelines about what business activities can be included in a claim and activities that can’t.

The most important thing is that the work undertaken makes an advancement or improvement in science or technology.

A company can create and submit an R&D claim without the help of a R&D tax specialist but most companies use one to make sure they’re claiming for everything possible.

Usually, using a specialist makes the process of claiming R&D tax credits a lot easier because they can quickly access what does and doesn’t qualify within a claim.

Specialists are also experienced in the report writing process, taking the burden of the process off the shoulders of company directors and staff.