Research & Development tax credits

Companies that carry out Research and Development (R&D) can often reduce their tax bills by claiming additional relief for some of their qualifying expenditure.

Under the small company scheme, a deduction of 175% of qualifying expenditure can be claimed when calculating the company's taxable profits. Where this creates or increases a loss, the net loss can be surrendered for a tax repayment from H M Revenue & Customs (HMRC) of up to 24% of the qualifying spend. Alternatively the loss may be carried forward and utilised against future profits, giving potential tax funding of up to 49% of the qualifying spend.

A scheme for larger companies providing a deduction of 130% of qualifying expenditure is also available as well as 100% first year capital allowances for plant and machinery related to R&D work.

What is R&D?

R&D takes place where a project seeks to achieve an overall advance in science or technology. Many such developments are to increase efficiency, functionality or productivity.

If you are developing a new product or process which is not currently available in the marketplace, whether this is development for resale or for your own internal use, you may be undertaking qualifying R&D.

Qualifying development is not restricted to new tangible products, the creation of new software, intangible assets and intellectual property can qualify for enhanced R&D allowances providing the design and techniques used are sufficiently innovative.

We have submitted a large number of R&D claims on behalf of our clients resulting in many thousands of pounds of relief. We have considerable experience here and can help you to identify whether or not your activities are likely to constitute qualifying R&D activities.

We will then assist you with identifying all relevant expenditure, including the inclusion of many indirect costs which are often overlooked by others and finally with calculating the tax reliefs available and submission of your claim to HMRC. We can do this either as a standalone service or as part of your corporation tax compliance work.

Please click here for our leaflet on R&D tax relief schemes.