Joshua Leigh & Co

Could you be eligible for R&D tax credits?

R&D tax credits offer a fantastic opportunity for businesses to reclaim some of the costs involved in developing innovative new products, services or processes.

With generous reliefs available to businesses it is somewhat surprising that they remain so underutilised by businesses in the UK.

Part of the reason why they remain so underused are the myths and confusion that surround eligibility for the scheme.

Eligibility for R&D tax credits

A company will usually be eligible for R&D tax credits if it has:

Developed new products, processes or services

OR

Appreciably improved an existing product, process or service.

OR

Made a technological or scientific advance or development that advances as a whole the industry you operate.

Claiming R&D tax credits against these developments provides either a reduction to Corporation Tax or a payable tax cash credit if your company is loss-making.

Therefore, in order to benefit from R&D tax credits, a business must:

• Be a UK limited company that is subject to Corporation Tax.
• Have completed qualifying research and development activities.
• Have spent money on an eligible project.
• Have incurred qualifying expenditure.

Types of relief available

Depending on whether you are a small to medium-sized enterprise (SME) or large company, the scheme that you apply for can differ.

The scheme classifies a business as an SME if it has fewer than 500 staff and either not more than €100 million turnover or €86 million gross assets.

Any business with more than 500 members of staff and either more than €100 million turnover or €86 million gross assets is classed as a large business.

SMEs must apply for the SME R&D tax credit scheme, while large companies can apply for Research and Development Expenditure Credit (RDEC) – although where an SME works alongside a large company on R&D, they may be able to claim Research and Development Expenditure Credit or even both schemes.

SMEs can claim up to 33p tax back for every £1 spent on qualifying R&D activities.

Large companies can claim around 10p for every £1 spent on qualifying R&D activities.

Avoid misconceptions

There is a perception or myth that R&D tax credits are only available to those working in high-tech sectors.

However, the reality is that this initiative is open to businesses of all sizes in almost every sector.

HMRC has received successful claims across a variety of sectors including:

• Agriculture
• Architecture
• Charity trading subsidiaries
• Construction
• Manufacturing
• Professional Services
• Retailers
• Waste Management and Recycling.

Within the scheme’s accepted research and development definition, R&D doesn’t even have to have been successful to qualify and you can also include work undertaken for a client.

Here to help

Our team have an exceptional record for helping firms of all sizes and sector make successful R&D tax credit claims.

By seeking out professional advice and support you can remove the stress of making a claim and significantly improve your chances of success.