Research & Development (R&D) Tax Relief is one of the UK’s most generous corporation tax reliefs but is still widely under-claimed, with thousands of eligible companies missing out on significant tax benefits.

One of the common misconceptions is that R&D only relates to activities that are going to completely revolutionise science and technology. But this is not always the case. If your company is creating (or even modifying) an existing product, process or service and is overcoming scientific or technological uncertainties in achieving this, then you could potentially be entitled to a claim - even if the project itself is unsuccessful.

What is R&D Tax Relief?

R&D Tax Relief is a government initiative that encourages innovation and increased spending on R&D activities by providing a potentially significant corporation tax benefit.

There are two schemes depending on the size of your business. A company would qualify for the SME scheme if:

• You employ under 500 staff and
• Either your turnover is less than €100 million or the company’s balance sheet is less than €86 million

Any business exceeding the above would fall into the “large company scheme” for R&D purposes. Under this scheme, you could claim up to 10p for every £1 of qualifying expenditure.

For profit-making SMEs there is an average tax benefit of up to 16.5% - and the average claim made under this scheme so far in the year 2022/23 is worth £36,000 in cash. Loss-making SMEs can also benefit by claiming up to 19p for every £1 of qualifying expenditure as a cash payment.

Who qualifies for R&D Tax Credits?

UK businesses that incur expenditure developing new products, processes or services (or even enhancing existing ones) are eligible for R&D tax relief – and this is not limited to any specific sector.

To qualify you must:

• Be a limited company trading in the UK for more than 12 months that is subject to Corporation Tax
• Have carried out qualifying research and development activities
• Have incurred expenditure on these projects

The potential scope for successful Research & Development claims may well be greater than you think.
Below is a list of sectors in which we already make successful claims:

• Aerospace and defence
• Automotive industry
• Banking and finance
• Chemicals, paints and adhesives
• Clothing, textiles and fabrics
• Construction and building materials
• Electronic and electrical
• Engineering and machinery
• Food and drink
• Games software industry
• Health
• IT hardware
• Manufacturing
• Household goods and textiles
• Personal care and cosmetics
• Pharmaceuticals and biotechnology
• Printing and packaging
• Software development
• Telecommunications
• Transport
• Waste recycling
• Water treatment

How can we help?

Our specialist R&D team is made up of qualified accountants and tax experts who, quite uniquely, have a wealth of industry experience, many of them with additional scientific and engineering qualifications. This makes them well placed to be able to review the technical elements of your business with R&D in mind.

All it takes is a simple 10-minute conversation to gather basic information to assess whether there may be qualifying expenditure. If you are already claiming R&D, it is worth getting in touch as the team can help maximise and increase the robustness of your claim. Our R&D investigative process is fully auditable and includes the submission of a technical report to support the claim and ensure full compliance with legislation. We will also liaise with HMRC on your behalf to deal with any queries and to secure the acceptance of a claim.

The time is now!

R&D claims can be made for the previous two accounting years which are then offset against your profits, potentially leading to a significant repayment in corporation tax. Even if your company is not making a profit, you can still benefit by choosing to sell the loss to HMRC and receive cash back instead.

Timing is critical – you don’t want to be in a situation where you have missed out on a claim because of any time limits. Our R&D team is able to act quickly, so if you think there may be something worth looking into, please get in touch with us on 0121 693 5000