R&D Tax Credits - Not Just For Men in white Coats

James Thompson

The Research & Development tax relief is one of the most generous currently available but unfortunately, many businesses aren’t aware of it or don’t think that they would be eligible. We’re looking to promote awareness of this valuable tax relief to make sure you don’t miss out!

What is R&D tax relief?

It is a tax relief designed to encourage greater R&D expenditure by companies, leading in turn to greater investment in innovation. The relief works by reducing a company’s corporation tax liability by an amount equal to a percentage of the company’s eligible R&D expenditure.

How much is R&D tax relief worth to a company?

Profitable companies can achieve an additional corporation tax saving of 26% of the qualifying R&D expenditure. For example, if a profitable company spends £100,000 on qualifying R&D expenditure it will save £26,000 in corporation tax. This is in addition to the normal corporation tax relief of 19% achieved when the costs are charged to the profit and loss account.

Loss-making companies can recover up to 33.35% of their expenditure on qualifying R&D expenditure as a repayable tax credit – receiving an actual cash repayment from HMRC!

Does my Company qualify for R&D tax relief?

The answer may well be “yes.” R & D credits are available for any company which can demonstrate it is researching and introducing innovative products, or developing procedures or systems which enable them to operate more efficiently and produce higher quality products and/or services. This can be across all industries – you don’t need men in white coats working in laboratories to qualify!

Research shows that the main reasons why R&D claims are not being made are:

  • Companies simply don’t realise that they have carried out qualifying R&D – companies are misinterpreting the definition of R&D for these purposes, and
  • Some companies are not aware that this generous tax incentive exists or what it is worth to them.

Time Limits for Claims

A claim for R&D tax relief must form part of the company’s corporation tax return and must be submitted to HMRC within two years of the end of the accounting period. So a claim for the year ended 30 April 2018 must be made to HMRC by 30 April 2020.

If you'd like more information on R&D Tax Credits or if you want to find out if you're eligible for a claim, contact our HURST Tax on 0161 477 2474 or email tax@hurst.co.uk