Claim back Research and Development Tax Reliefs

Tax credits for research and development (R&D) are a government incentive intended to reward UK businesses for investing in innovation. They are a significant source of capital for companies to invest in accelerating Research & Development, recruiting new employees, and eventually expanding. It can be asserted by a variety of companies seeking to study or create a breakthrough in their industry. It can also be claimed on failed projects.

Projects that qualify as R&D
The potential for recognising Research & Development is vast – in reality, it exists in every industry. In addition, if you are claiming for the first time, you will usually assert R&D tax relief for the previous two completed accounting periods. Research & Development can occur in any industry. It can be found in everything from cheese production to chemical engineering, construction, and digital creation.

The work that qualifies for Research & Development relief must be part of a particular initiative to make a scientific or technological advance. It cannot be a breakthrough in social science, such as economics, or a scientific field, such as pure mathematics.

The project must be related to your company's trade - either a current one or one that you intend to start based on the Research & Development results.

To qualify for Research & Development tax credits, you must demonstrate how a project will:

  • be hoped for a breakthrough in science and technology;
  • be necessary to overcome uncertainty;
  • attempt to resolve any confusions;
  • be the only way in the field to solve the problem.

If your project meets the HMRC concept of Research & Development, as described above, you might be eligible to claim Corporation Tax relief.

Research & Development tax breaks come in a variety of flavours

The government's Research & Development requirements are intentionally broad. If your organisation, regardless of size or sector, is taking a risk by attempting to ‘resolve scientific or technological uncertainties,' you may be engaging in a qualifying activity.

Research & Development Tax Credits for Small and Medium-Sized Enterprises (SME)
If you are a SME, you can claim SME R&D relief if you have:

  • less than 500 employees;
  • a turnover of fewer than 100 million euros, or a balance sheet sum of less than 86 million euros.

When determining whether you are a SME, you need to consider related companies and partnerships.

SME Research & Development relief enables businesses to:

  • deduct an additional 130% of their qualified expenses from their yearly earnings, in addition to the standard 100% deduction, for a total 230% deduction;
  • claim a tax credit if the corporation is losing money, worth up to 14.5% of the surrenderable loss.

Credit for Research and Development Expenditures
This replaces the previous relief provided under the large business scheme.

For working on Research & Development ventures, large corporations may receive a Research and Development Expenditure Credit (RDEC).

It can also be said by SMEs and large companies that have been subcontracted by a large corporation to do R&D work.

The RDEC is a tax credit that was worth 11% of your qualified R&D expenditure up to December 31, 2017. It was raised to:

  • From 1 January 2018 to 31 March 2020, the rate was 12%;
  • From April 1, 2020, the rate was 13%.

In order to demand Research and Development tax reliefs, you must demonstrate that the R&D required discovery, testing, and review to improve it. Therefore, you must be able to justify the work you did to address confusion. This can be a simple explanation of your project's successes and shortcomings.

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