R&D tax credits

Dunkley’s Chartered Accountants have partnered with award-winning industry specialists Forrest Brown, who provide R&D tax relief assistance to both small and large UK businesses. Forrest Brown have 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, perhaps most importantly of all, 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?

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 your innovation, you can make an R&D tax credit claim to receive either a cash payment and/or Corporation Tax reduction.

Is my business eligible?

In order to benefit from R&D tax relief, you must;

  • Be a limited company in the UK that is subject to Corporation Tax
  • Have carried out qualifying research and development activities
  • Have spent money on these projects

If this still doesn’t make sense, our friends at Forrest Brown have designed a simple, easy to follow video outlining the eligibility factors. To view, click here.

Who qualifies 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.

If you are unsure and would like to know if your business qualifies, please call us on 01454 619900.

What counts as R&D?

When it comes to defining what counts as R&D, HM Revenue and Customs have purposely made their criteria broad. 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

What costs qualify for R&D Tax Credits?

When building an R&D tax credit claim, the following types of expenditure are looked for:

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

What R&D tax credit scheme is right for my business?

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

SME

Fewer than 500 staff and either not more than €100 million turnover or €86 million gross assets. Most companies, including start-ups, fall into this category.

Large company

500 staff or more and either more than €100 million turnover or €86 million gross assets.

How much is an R&D tax credit claim worth?

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 are able to claim up to 33p for every £1 spent on qualifying R&D activities. The average claim made by SMEs in the UK is £53,876 (2016-17).

Large companies are able to claim up to 10p for every £1 spent on qualifying R&D activities. The average claim made by large companies in the UK is £272,881 (2016-17).

The benefits of R&D tax credits

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

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