Tax incentives for Research & Development
The government actively encourages UK companies to carry out Research & Development (R&D) activities with a range of tax incentives. The incentives are only available to companies and include:
- higher deductions for R&D revenue spending
- an R&D tax credit payable to companies not in profit.
As a result of recent changes to the scheme, the R&D relief available has increased, but many companies are still unsure of how it works. If you expect to carry out R&D activity in the future, we can help you identify eligible spending and claim R&D tax relief.
The way you claim R&D tax relief depends on the size of your company. For small or medium-sized enterprises, the tax saving can be as much as 230% of the expenditure. A large company can make a tax saving that is as much as 130% of the expenditure.
How do you define Research & Development?
The activity can be classed as R&D if:
- a project seeks to achieve an advance in overall knowledge or capability
- the activity results in new or enhanced products or processes, and involves an advance in science or technology by resolving a scientific or technological uncertainty.
The project must relate to what the business does, or intends to start doing.
The project must not just be commercially innovative; there must be an advance in science or technology, but it can lead to a competitive advantage.
What costs are eligible for R&D tax relief?
Costs that generally qualify for R&D tax relief include:
- staff costs
- subcontracted R&D.
There are exceptions to the above and it must be proven that the costs have been incurred directly as part of the project.
Supporting clients to innovate
We have successfully made claims for businesses carrying out R&D activity across a wide range of business sectors, including:
- Food and beverage.
The practical application of R&D is broad but we have found that many businesses do not realise they have incurred costs that are eligible. We can review your expenditure and advise whether you can make a claim for R&D tax relief. We can also help identify missed opportunities, maximise claims and prepare draft reports to HMRC.