Research & Development Tax Credits
To help encourage innovation and boost productivity within the United Kingdom, the government introduced Research and Development (R&D) tax incentives for eligible businesses. These incentives are available for small and medium size enterprises (SMEs) and large companies.
Tax credit 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.
Companies that spend money on qualifying R&D projects can claim a proportion of that expenditure back as a tax credit.
What costs can be claimed for R&D tax relief?
Businesses engaged in qualifying R&D activities can claim a range of costs under the UK’s R&D tax relief scheme. Eligible costs can include:
- Staff costs: Salaries, National Insurance contributions, and pension contributions for employees involved in R&D activities.
- Consumable items: Materials such as raw materials consumed or transformed during the R&D process.
- Software: Costs of software used directly in R&D activities.
- Utilities: Proportionate costs of utilities like electricity and gas consumed during R&D activities.
- Subcontractor costs: Payments to subcontractors for R&D services, provided they meet specific criteria.
- Externally provided workers: Costs of workers provided by external agencies, if they are directly and actively engaged in R&D.
- Clinical trial volunteers: Payments to volunteers participating in clinical trials as part of R&D activities.
Only costs incurred during the R&D project are eligible, and they must have been paid before the claim is made.
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 field of science and technology, was able to overcome uncertainty and could not otherwise be easily completed by a professional within your field.
This could involve improving production processes, enhancing product performance, integrating new materials, or developing bespoke machinery.
If your team is spending time designing, testing, and refining solutions where the outcome wasn’t guaranteed at the outset, it’s worth assessing whether your project meets HMRC’s R&D criteria.
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.
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