To help encourage innovation and boost productivity within the United Kingdom, the government introduced Research and Development (R&D) incentives for eligible businesses. These incentives are available for small and medium size enterprises (SMEs) and large companies.

What are Research and Development tax credits?

Research and Development relief allows companies to claim back a percentage of their tax losses as a payable order from HMRC, providing the company is working on a qualifying R&D project.

For SMEs, R&D tax relief involves increasing the amount a company can obtain tax relief on, above the normal 100% revenue deduction. This relief is an additional 130% for qualifying expenditure incurred by an SME.

An SME may claim a payable R&D tax credit for an accounting period in which it has a surrenderable loss. The amount of payable tax credit that a company is entitled to for an accounting period is 14.5% of the surrenderable loss for that period.

There is a cap, however, to the amount a business is able to claim. Beginning in April 2021, the amount of tax credit available for SMEs to claim is restricted to £20,000, plus 300% of the companies’ PAYE/NIC liabilities. You can read more about the recent changes to R&D tax credits here.

Large companies can claim a 13% tax credit on qualifying expenditure.

Is my business eligible for Research and Development tax relief?

In order for your business’s project to qualify for R&D tax relief, the project must be seeking to achieve an advance in overall knowledge or capability in a field of science or technology.

You’ll need to provide evidence for how the project made an advance in the fields of science and technology, was able to overcome uncertainty and could not otherwise be easily completed by a professional within your field.

How can Edwards Accountants help?

By contacting our experienced tax advisors, you can potentially maximise the amount of tax relief you are able to claim. We help clients to identify their qualifying activities and expenditure.

Our expert team ensures that clients receive their maximum incentive, which is robust to HMRC scrutiny. Unlike most accountancy firms, we charge on a fixed fee basis rather than a percentage of the refund received. This generally means our clients pay considerably less for our services.

We also provide a range of other tax services to tech companies, including share option schemes and assistance with the Enterprise Investment Scheme (EIS).

To find out how we can assist your tech business with Research and Development Tax Relief, please contact us.