Research & Development (R&D) Relief
The R&D relief scheme started in 2000. It is a Corporation Tax Relief that could reduce your company’s tax bill, or in some cases a tax credit. The scheme supports UK businesses that develop and improve technology which will ultimately lead to new and improved products and services.
There are two schemes dependent on your company’s size:
|Small or Medium-sized Enterprises (SMEs)||<500 employees Annual turnover > €100m|
Balance sheet < €86m
May need to consider shareholding companies
|Large Company||All other not SME|
The SME scheme
Relief under the SME scheme is more beneficial when compared to the large company scheme. From 01/04/11 the enhancement for qualifying costs was 200%. This enhancement was increased to 225% from 01/04/12.
Prior to 01/04/11 the minimum expenditure qualifying for R&D purposes was £10,000. This limit was removed on 01/04/12. There is no upper limit for qualifying expenditure.
An R&D Project
A company claiming R&D tax relief will need to have an R&D project.
“An R&D project must seek to achieve advancement in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty, and not just advancement in its own state of knowledge or capability.” HMRC
There are a few key areas that an R&D claim will need to satisfy. Here is a brief outline of what HMRC will be looking for:
- What is the scientific or technological advancement?
The project must aim for advancement.
- What were the scientific or technological uncertainties involved in the project?
Uncertainties exist when knowledge of whether something is scientifically possible or technologically feasible is not readily available or deductible by a competent professional in that ‘science or technological’ field.
- How and when were the uncertainties actually overcome?
What methods were used to overcome the uncertainties? What investigation and analysis was done? Look at the successes and the failures when performing the advancement, and the impact they made on the overall project.
- Why was the knowledge being sought not readily deductible by a competent professional?
If uncertainty is publicly known, there may still be a valid uncertainty. If the uncertainty is unknown to the public more information is required on the project leaders, their backgrounds and why they determine the uncertainly to be a valid uncertainty.
It is important to note that along with the above, a comprehensive narrative of your R&D project will be required when making a claim. HMRC will use this document for the legitimacy of any claim. Please contact us for any further information.
Costs must be connected to the project (seeking advancement), they can be directly qualifying or indirectly qualifying. Examples of revenue qualifying costs are employee costs, staff providers, materials, trials (or clinical trials), utilities, software and subcontractors. Capital qualifying costs are accounted for differently to those revenue expenses above.
Taxable profits are reduced by an additional 100% of qualifying costs and can be offset against profits or carried forward to future profits.
This is dependent on profits or losses and the enhancement of qualifying R&D costs. An R&D tax credit may be available if losses are surrendered at 12.50%.
How & When
R&D claims are sent to HMRC using the company’s tax return. Specific computations and narratives are required, however. It is also possible to claim for R&D relief even if your tax return has been submitted, providing that we claim within two years of the year-end date in which the R&D project was carried out. Please contact us for more information.
‘RnD’ing with Shahidullah & Co
We proudly hold a 100% success rate for R&D claims. An R&D claim is tough and the procedure is not easy. We are pleased to help our clients with all aspects of the claim. We will assist you with our specialised knowledge and links and work hard at every step to make your claim successful. We will provide you with up-to-date information on which aspects of your business need analysing. We can also provide you with guidance from HMRC that will help you with your claim.
The main issues to consider when submitting an R&D claim are the comprehensive narrative of the project, a scrutinising qualifying cost computation and the tax return. These need to be presented to HMRC along with any R&D claim. We can help extensively with all of this from start to finish. We will need those who are involved in the R&D project, essentially the project co-ordinator, to be at hand all times of the claim.
As the claim process is time consuming for any business, we will carry out work on your behalf and ensure that key people in your company are kept up-to-date at all times
If you have in the past been involved in R&D or are currently involved in R&D-related projects, do not miss the chance of being involved in the R&D scheme. We are more than happy to offer a no-obligation assessment of any potential R&D claim and a free business review. We also pledge to give you regular time to ask questions regarding the scheme itself or your specific claim. Please call us for any further information.
Happy research and developing!