Since their launch in 2000, over 300,000 R&D tax credit claims have been made by businesses which have resulted in £33.3bn of tax relief being awarded.
14 October 2020
R&D Tax credits have proved to be a valuable source of financial support in helping businesses (small and medium sized enterprises in particular) innovate and grow. Many companies however don’t realise that their activities and projects may make them eligible for this tax relief as the terminology and jargon associated can be confusing and off-putting.
Common misassumptions
R&D tax credits are not just for the development of theoretical research and patentable or ‘lab coat’ produced products. The qualification criteria for them is much, much broader.
A business that investigates innovative ways to increase efficiency, improve quality or generate new or improved products or services may qualify for the scheme. It’s not surprising that in recent years, more industries including IT, Communications, Construction and Financial Services have been benefitting from the support.
What tax breaks are available?
A company can claim up to 230% relief on their corporation tax for any money they spend on the R&D project. This means the company will get full tax relief for the cost of the R&D project, and will also receive an additional 130% corporation tax deduction. Even those companies making a loss as a result of their R&D programme can receive a repayable corporation tax credit for up to 33% of the project's total cost.
Does my business qualify?
If your business has…
- fewer than 500 employees
- a turnover of under €100m
- a balance sheet total of under €86m
…you could be eligible to make an R&D claim under the Small and Medium Enterprises (SME) scheme.
No company is too small for the Scheme and many successful claims have been made by innovative start-ups as well as businesses with annual turnovers of circa £1.5m.
Qualifying R&D, for example, includes projects which seek to achieve any of the following:
- extend overall knowledge or capability in a field of science or technology
- create a process, material, device, product or service which incorporates or represents an increase in overall knowledge or capability in a field of science or technology
- make an appreciable improvement to an existing process, material, device, product or service through scientific or technological changes
- use science or technology to duplicate the effect of an existing process, material, device, product or service in a new or appreciably improved way (e.g. a product that has exactly the same performance characteristics as existing models, but is built in a fundamentally different manner), will therefore be R&D
How we help
We have advised a number of companies which of their activities and projects are eligible under the Scheme. R&D tax credits benefit businesses from a wide range of industries including:
- App, gaming and software development
- Biotechnology
- Communications technology
- Electronics
- Engineering
- IT
- Manufacturing
- Materials technology
- Pharmaceuticals
- Transport
- Web design
We help companies scope their R&D and produce justification documents and reports to support their R&D tax credit claims. We also help and advise them in the application process so they comply with the relevant legislation and can gain a successful outcome.
If the R&D Tax Credit Scheme could benefit your business, please contact one of our specialists shown on this page for an initial chat.
Specific advice should be obtained before taking action, or refraining from taking action, in relation to this summary. If you would like advice or further information, please speak to your usual Shipleys contact.
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