Please see below a list of our most Frequently Asked Questions related to R&D Tax Claims.
A wide range of activities will allow you to qualify for R&D credits, including:
- Developing or engineering a new or improved product, process, formula, or software
- Evaluating the feasibility of a product, process, formula, or software
- Developing experimental models & prototypes
- Testing an experimental product, process, formula, or software
- Beta testing
- Improving processes or the manufacturability of a product
- Technical design reviews
- Developing engineering architecture
- Compiling research data
- Fabricating experimental models
- Experimenting with new technologies
- Creating more efficient and environmentally friendly designs
- CAD or 3D Modelling
- Participating in technical meetings
- Documenting the results of research
- Maintaining research equipment
- And more…
If you’re unsure whether or not you qualify for R&D credits, you can always contact an R&D specialist. Businesses working across a diverse range of different sectors are eligible to claim.
R&D expenditure (Research and Development expenses) are directly associated with the research and development of a company’s goods or services, as well as any intellectual property generated in the process.
The vast majority of companies generally incurs R&D expenses in the process of finding and creating new services or products.
You can claim back two years’ worth of R&D credits. So if you haven’t already, it’s certainly worth your while to begin your claim today!
There are three different qualifying expenditures that all businesses should be aware of. These are:
- Wages for employees directly working on, supervising, or supporting the development process involved with a new product or service.
- Supplies of items that are being used or consumed during the development process
- Contract Research undertaken by outside vendors that have been directly employed to assist in the development process
It’s important that all businesses understand the difference between SME and RDEC schemes, which we have outlined below:
To claim R&D Tax Credits using the SME scheme, businesses which meet a set of criteria which states that companies must employ no more than 500 members of staff and have a turnover that is less than 100 million.
The SME scheme has been around for several years and allows all profitable organisations falling within these brackets to deduct an extra 130% of their eligible R&D expenditure from their taxable profit.
Research and Development Expenditure Credit (RDEC)
On the other hand, the RDEC tax relief scheme was set up to allow for larger companies looking to claim for their innovative projects. The abbreviated term for Research and Development Expenditure Credit, RDEC was set up as a replacement for its predecessor – the Large Company Scheme.
If you are looking to apply under RDEC, all companies must employ at least 500 people and have a recorded turnover of 100 million. The main purpose of the RDEC scheme is to allow larger companies to successfully claim back 13% of their eligible R&D expenditure.
Yes, you can claim for any subcontracted work that you have been involved in. In fact, an SME that has carried out research and development will usually be able to claim 65% of the costs paid to any subcontractor for qualifying activities (please see qualifying activities listed above).
At the moment, it generally takes around 6 weeks in total from the submission of your claim to receiving your R&D tax credit from HMRC.
You can make a claim for R&D relief up to 2 years after the end of the accounting period it relates to and our expert team will submit your claim to HMRC on your behalf.
If you use the R&D tax credit scheme there are five ways in which you could receive your R&D tax credits payment. Please see the options below:
- A cash rebate
- A corporation tax saving
- Loss reliefs
- A combination
In order to estimate the amount you are likely to get back from HMRC, you should follow these steps:
- Add up the total costs above for each employee who worked on the research and development project.
- You will then need to multiply this by the portion of the time they spent on the project in the claim year!
- You must do this for all employees that worked on the project.
There are lots of different grants available and the good news is that no other grant funding will affect your R&D tax credits claim! In fact, if you do win a grant, there is a probability that some of your development work will qualify for R&D Tax Credits too!
R&D Tax Credits are non-taxable therefore, they will only affect a company’s tax charge!
Specialist R&D Tax Credit firms such as ourselves are trained specifically in handling this type of claim and work closely with R&D tax inspectors, which helps to process the claim far quicker than if it was left in the hands of an Accountant.
But that’s not all. If HMRC raises any questions about the claim at any stage of the process, an Accountant would not be able to provide the same level of help and support you would get from a R&D Specialist.