Corporation tax

R&D tax credits

Helping innovative UK businesses grow 

Dunkley’s has a partnership with award-winning industry specialists Forrest Brown, who provide R&D tax relief assistance to both small and large UK businesses.

Forrest Brown has a proven track record in making robust, successful R&D tax relief claims for their clients. They know what to claim, how to claim, and the many pitfalls to avoid.

What are R&D tax credits?

Research and development (R&D) tax credits are a Government incentive designed to reward UK companies for investing in innovation.

How do R&D tax credits work?

Innovative companies that spend money developing new products, processes or services (or enhancing existing ones) are eligible for R&D tax relief.

If you’re spending money on innovation, you can make an R&D tax credit claim to receive either a cash payment and/or corporation tax reduction.

Eligibility for R&D tax credits

R&D can take place in any business sector. It occurs in everything from construction to cosmetics, food processing to printing and apparel to agriculture.

In order to benefit from R&D tax relief, your company must:

  • Be incorporated in the UK and subject to corporation tax
  • Have carried out qualifying research and development activities
  • Have spent money on these projects

If this still does not make sense, Forrest Brown has designed a simple, easy-to-follow video outlining the eligibility factors. To view, click here.

If you are unsure and would like to know if your business qualifies for R&D tax credits, call us on 01454 619900.

What counts as R&D?

Whatever size or sector, if your company is taking a risk by attempting to “resolve scientific or technological uncertainties” then you may be carrying out qualifying activity. This could include:

  • Creating a new product, process or service
  • Changing or modifying an existing product, process or service.

Qualifying costs

When building an R&D tax credit claim, the types of expenditure we look at are:

  • Staff, including salaries and expenses, employer’s national insurance contributions and workplace pension contributions
  • Subcontractors and freelancers
  • Materials and consumables
  • Software
  • Payments to the subjects of clinical trials.

R&D tax credit schemes

What scheme you use to make an R&D tax credit claim will largely depend on whether you are a small or medium-sized business or a large company.

R&D tax relief for SMEs

If you employ less than 500 staff and have a turnover of under €100 million or a balance sheet total under €86m, you may be able to claim this relief.

R&D expenditure credit for large companies

If you employ more than 500 staff and have a turnover of €100 million or more, or a balance sheet of more than €86 million, you may be eligible for the RDEC.

How much are your claims worth?

Whichever scheme your company may qualify for, R&D tax credits are calculated based on your R&D spend.

To make an R&D credit calculation, you need to identify qualifying expenditure and enhance it by the relevant rate (see below). This produces your ‘enhanced expenditure’.

When you deduct your enhanced expenditure from your taxable profits, or add it to your loss, it will result in:

  • A corporation tax reduction if you are profit-making
  • A cash credit if you are loss-making
  • Or a combination of the two.

R&D tax credit rates

SMEs can claim up to 33p for every £1 spent on qualifying R&D activities, with the average UK SME claiming around £54,000.

Large companies can claim up to 10p for every £1 spent on qualifying R&D activities. The average claim made by large companies in the UK is around £273,000.

The benefits

As a form of innovation funding, R&D tax credits can transform your company.

To discuss how R&D could help your company fulfil its full potential, call us on 01454 619900 for expert guidance and advice on eligibility and next steps with Forrest Brown.

Meet your specialist

Dunkleys Matt

Matthew Dobbins

Director

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