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R&D Tax Credits

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The R&D tax credit scheme is the single largest support for UK business. Introduced by the UK Government in 2000, the R&D tax relief scheme is designed to encourage innovation and global competitiveness by allowing companies to reclaim some of the money invested in qualifying research and development.

What’s it worth?

From 1 April 2015, Small and medium-sized companies (SMEs) can recover up to 26% (if in profit) and 33.35% (if loss-making) of all eligible R&D expenditure.

This equates to up to 33p for every £1 spent on qualifying costs. This means If you spend £150k on qualifying R&D, you could receive up to £50k as an R&D tax credit.

If eligible, you can typically claim R&D tax credits for your last two accounting periods, so many UK businesses miss out on the significant financial opportunity available to them.

Who can claim?

The main criteria are determining whether an innovative company is seeking an advance in knowledge or improving a product or service, and resolving uncertainties in the process.

It’s surprising how many businesses believe R&D tax credits are only for high tech companies or scientists in research labs. This simply isn’t true.

An example is a business involved in the production of bread; the company needed to produce a loaf of bread priced competitively with a longer shelf life than its competitors, freshly-baked product. Its costs incurred in producing this were claimable.

One of the most overlooked pieces of innovation in businesses, is the customer management software. If you have adapted out-of-the-box software, or built your own from scratch and you are not claiming R&D tax credits, then you could be missing this significant opportunity.

You must be a limited company paying Corporation Tax in the UK, however,

What is an SME?

A company is regarded as an SME if it has a staff count of below 500 and it meets at least one of the following; an annual turnover under €100 million or a balance sheet under €86 million.

Any company which is not an SME qualifies as a Large Company. (please see my post – R&D TAX CREDITS – LARGE COMPANIES/ ORGANISATIONS)

What costs qualify as R&D?

R&D tax credits can be claimed on staff costs, subcontractors, consumable materials and equipment, utilities (power, water and fuel), computer software and potentially lots more.

Speak to a Datafox industry expert to find out what specific costs are claimable for your business.

How long does the claim take?

From the start of the process to your company receiving R&D Tax Credit repayment from HMRC usually only takes between 6 and10 weeks. At Datafox, we allow ourselves around 2-4 weeks to prepare the claim and HMRC 4-6 weeks to process it, once submitted.

 

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