Tax

Why your clients should know how to cash in on R&D tax credits

As many as nine out of ten companies eligible to claim Research and Development (R&D) tax relief are failing to do so.

This is obviously a large and untapped opportunity – both for the companies concerned and the UK economy. Accountants are well-placed to put that right by offering appropriate advice.

How much can companies get?

When a business spends money developing new products, processes or services; or improving existing ones, many of the costs could be eligible for R&D tax relief.

SME R&D relief allows companies to deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction!

It also enables the qualifying company to claim a tax credit if the company is loss-making, worth up to 14.5% of the surrenderable loss.

R&D claims the easy way

Are your clients eligible for research and development tax credits? If you’re an AAT Licensed Accountant, you can now refer your clients to randd UK, who will manage their claims free of charge and give you 10% of the commission.

Learn more

Who can claim?

It’s not just trendsetting tech companies or pioneering pharmaceutical firms that are eligible. Manufacturing and engineering companies are popular recipients. In fact, any business that is creating – or enhancing products, processes or services can probably show it is carrying out activities that could be eligible for R&D tax credits.

The scheme is intended to benefit small and medium-sized companies. So there are some relevant criteria:

  • The company can claim SME R&D tax relief if they have less than 500 staff and a turnover of under €100m but the company project must meet HMRCs definition of R&D.
  • The definition requires that the work that qualifies for R&D relief is part of a specific project to make an advance in science or technology (not an advance within a social science like economics). It can be researching or developing a new process, product or service or even improving on an existing one.

8 costs companies can claim for:

Here is a list of the things that can be claimed for:

  • Direct Staff costs
  • Externally provided workers
  • Subcontracted R&D
  • R&D consumables
  • Software
  • Clinical trial volunteers
  • Contributions to independent research
  • Prototypes

How to make a claim

A claim for R&D relief can be submitted up to 2 years after the end of the accounting period it relates to.

You can claim the relief by entering your enhanced expenditure into the full company tax return.

Read more in HMRC’s online guide.

David Nunn is Content Manager at AAT.

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