R&D tax credits are money you can claim against expenditure on research and development projects.
This is a government scheme enabling you to claim annually for the costs of these activities, within your accounting period.
The value of your R&D claim will depend on how much you have spent on R&D that is eligible. It is the savings you make on your tax as a result.
There are different types of R&D tax relief, for SMEs and larger companies:
For example, if you incorporated yours on March 19, the year-end is usually on this date.
If you’re an SME, you can claim SME R&D relief. This allows you to deduct an extra 130 per cent of your qualifying costs from your annual profit.
This is in addition to your normal 100 per cent deduction.
If your company is making a loss, you can claim an R&D tax credit of 14.5 per cent of the figure you surrender.
If you’re a larger company, you can claim for R&D under Research and Development Expenditure Credit (RDEC).
The amount is currently 13 per cent of your qualifying R&D expenditure.
Advanced Assurance for R&D tax credits is a service provided by HMRC in the UK to small and medium-sized enterprises (SMEs).
It allows businesses to gain certainty about their eligibility for R&D tax credits before they make a claim. By applying for Advanced Assurance, an SME can receive confirmation from HMRC that their R&D projects qualify for tax relief.
Once granted, this assurance typically lasts for three years, simplifying the claims process and providing peace of mind that the company’s R&D activities meet the necessary criteria.
To qualify for HMRC R&D tax credits, a project must be part of something that is making an advance in science or technology.
This involves researching or developing something that is new, or improving something that already exists.
For your R&D project to qualify, you must show that:
The advances should be for the field it is in, not just for the benefit of your specific business.
Essentially, to qualify, your R&D project must be looking to resolve a technological uncertainty.
The type of costs you can claim for are:
No. Any industry or sector can apply for R&D tax credits. The important thing is that the work carried out qualifies under the scheme.
Even though the eligibility of a claim depends on resolving technological uncertainty, a broad range of businesses may apply under the scheme, including:
When you apply for an R&D tax credit at the end of your accounting period, this can cover qualifying work up to two years before this date.
Any R&D work which happened earlier than this two-year period, which you haven’t already claimed for, is not eligible.
Because you’re claiming for work you have already carried out, it must fall within two years of the end of your current accounting period.
Therefore, you should be claiming for it within the 12 months you would normally file your tax returns following your accounting year end.
Often R&D projects will extend over several years.
Therefore, you can keep claiming for work you have undertaken, providing you have not already claimed R&D tax relief for it.
You must first make sure your work is eligible under the government’s conditions for claiming R&D tax credits.
You will need to collect all relevant technical and financial documents relating to the project for which you’re claiming.
This also involves separating time and costs of eligible and non-eligible activity within a project.
Prepare your claim documentation, including a summary that explains what the project involved and what its objectives were.
Review all your supporting material, and your summary, before submitting your claim to HMRC.
Successful claims may take 28 days, but occasionally take longer.
You should also take into account the time needed to prepare and analyse all the details you will need to submit.
You can make significant savings on your corporation tax bill if you’re successful in claiming R&D tax relief.
You can still apply if your business is loss-making, and you can apply even if you do not meet your objectives, despite spending on R&D.
There are no minimum claim requirements, and to qualify you don’t have to be a specific type of business.
R&D tax credits can apply to tech startups, SMEs in retail and manufacturing and a wide variety of sectors.
As cloud-based accountants serving the whole of the UK, Venn Accounts can provide you with a dedicated resource to support your claim for R&D tax credits.
We’ll be able to assess the details of your project to check whether it qualifies under the scheme’s terms.
Then we will help you gather all the documentation you need, and put together your summary.
With our help, you can optimise your claim for R&D tax credits, reducing the risk of error.
You’re the expert in your field, and we’re specialists in ours.
We’re here to help and support you, bringing our extensive working knowledge to you, working with you.
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Operating from our London head office, Venn Accounts a traditional accounting firm. We are committed to ensuring all our clients are completely clear about what we can do for them, while fully supporting them every step of the way.
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