Research and Development Claims

Whist reviewing some of companies listed on our free service, you may notice references to R&D Tax claims, this post explains a bit more about them.

What are R&D Tax Credits?

Research and Development Tax credits have been introduced by HM Government to encourage innovation and make it more attractive for UK Companies to spend more on Research and Development (R&D).  It is a very generous and helpful scheme that allows up to 33.33% of a companies revenue (which releates to R&D) to be recovered in a cash payment.

Many businesses don’t realise that they qualify for R&D Tax Credits or that they are not claiming their full entitlement. The R&D Tax Relief scheme has been in existence for over 15 years and nearly £2bn per annum is currently being claimed. On average SMEs are claiming £46,000 each per year.

The small company scheme allows for 130% of spend to be claims.

Who qualifies for R&D Tax Credits?

Any company in any industry may be eligible for R&D Tax Credits. The R&D consideration is if that company isundertaking development activities that seek or achieve an advancement in technology.

A good test to determine if the work undertaken qualifies for R&D relief is whether your project team faced technological uncertainties at the start of the project. That means that your team did not know from the outset whether a particular technological goal was achievable. If you can show that your project goes beyond applying existing technologies and demonstrate that it breaks new ground, you can claim R&D tax relief.

How about Large companies?

Generally if a company has more than 500 staff it will be eligible to claim as part of the Large company scheme. This has recently been increased to 12% of spend but previous was 11% and before that 10% of eligble spend.

Generally the scheme is very positive and from the national statistics it is helpfing many smaller companies who would struggle otherwise to finance investment like this and larger companies get assistance to compete with companies in the USA and Germany for example which traditionally have been more innovate than UK ones.

If your business is undertaking any development activity then you might wish to consult your accountant or other professional advisor.

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