The Research and Development (R&D) Tax Credits scheme is a government incentive designed to encourage and reward forward thinking UK companies with a passion for innovation. For every qualifying R&D project, organisations can receive financial relief in the form of cash credits or a Corporation Tax reduction, making the scheme well-worth pursuing.
With this in mind, here’s how UK businesses can claim for R&D Tax Credits to help with a cash boost.
- Pursue innovative science and technology projects
Pursuing creative scientific and technology projects could gain you access to tax relief. Remember, it’s the specific project which is of interest and not the industry, so whether you’re developing a prototype engine that’s more eco-friendly or overcoming a technological problem that many construction companies face, you could qualify for much needed financial help.
When submitting your claim, be sure to provide specific details about what you are working on as this will help decide if your project qualifies. Rather than stating the product, process or functionality being developed, focus instead on the technological and scientific advances being sought, as R&D relief will go towards projects that work to actively develop and improve knowledge within relevant fields.
- Know your schemes: SME or RDEC
The level of R&D relief available will depend upon which scheme you use, so it’s essential to understand the difference between SME and RDEC. If you have less than 500 employees and a turnover of less than €100m (ora balance sheet total of less than €86 million) you will fit into the SME scheme. If you don’t fit the SME criteria you will fall under the RDEC incentive.
Of course financial help for all organisations is welcome but for small businesses, it can really help to take things to new heights and put potentially world-changing ideas into practice. Companies can save great sums of money too, with tax relief for SMEs having the potential to be as high as 26p for every £1 spent on qualifying R&D expenditure. Be sure to take a look at a relevant R&D Tax Credit example to see exactly how this incentive works.
- Be aware of grants
Grants can greatly affect whether you’re entitled to R&D Tax Credits or not. If you’ve received a notified State Aid grant for the projects you are claiming R&D Tax Credits for, you won’t be eligible for the R&D Tax Credits SME scheme. It’s worth noting, however, that it is the project that will be disqualified in this case and not the company, meaning if you have multiple R&D projects on the go you may claim for any that are not State Aid funded.
If you have received a non-notified State Aid grant – examples being Horizon 2020 or Framework Programme funding – you may still be able to claim R&D Tax Credits through the SME and the RDEC scheme.
- Making a claim
Businesses can make a claim by entering the total qualifying expenditure on the full Company Tax Return form, CT600. If your company has been carrying out suitable R&D projects without claiming Tax Credits it is also possible to make a backdated claim in order to receive the relevant funds.
According to HMRC statistics, 90 per cent of eligible companies are failing to claim the R&D Tax Credits they’re due, so be sure to do your research and fill out the relevant forms if you believe your company is working on relevant projects within the required science and technology sectors.
