Research & Development

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Millions of businesses are missing out on valuable tax breaks each year.

This is because many businesses don’t know they can claim Research & Development (R&D) Tax Relief, or how to go about it.

R&D Tax Relief came into effect in 2010 with the aim to encourage UK based companies to spend more on Research and Development.

SMEs (a company with less than 250 employees) and large companies can claim back a percentage of the amount they’ve spent on qualifying R&D.

The money can either reduce the company’s corporation tax liability or result in a repayment to the company.

This money is tax free and can be used for anything you wish.

Who can claim?

A company can claim for R&D Tax Relief if the project covers the following:

• An advance in science or technology

• Directly contributes to achieving an advance in science or technology

• Scientific or technological development

The project must relate to your company’s trade, whether that is an existing company or a new company.

Other factors that must be demonstrated to claim R&D:

  • Technical uncertainty – There must be an element of technological uncertainty prior to the work commencing and isn’t readily available or deducible by a competent professional working in the field.
  • Innovation – If the project has achieved something that no-one (or few people) has achieved.
  • Money – You will need to have spent money developing your project.

Are you missing out?

If your business spends money developing or enhancing new products or services in science or technology, then you could receive a cash payment or a reduction on your Corporation Tax Liability.

For example:*

Qualifying expenditure                               £100,000

Additional tax relief at 130%                      £130,000

Total tax saving £230,000 at 19%             £43,700

*Figures correct as of April 1, 2021

NB: Please note that any R&D in receipt of funding classified as ‘State Aid’ may not qualify for the full tax relief above, but instead at a much lower rate.  If you are considering ‘State Aid’ funding, please contact us to discuss the implications before making a final decision.

There are a number of costs that qualify for R&D including:

• Employee costs

• Staff providers

• Materials

• Payments to clinical trials volunteers

• Utilities

• Software

• Subcontracted R&D expenditure

• Capital expenditure

Note: You must make any claim for R&D Tax Relief in your Corporation Tax Return or amended return.

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