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R&D tax credits
What are R&D tax credits?
In the UK companies are able to claim tax relief for their R&D activity. These government schemes are designed to boost innovation by supporting businesses who seek to improve or overcome challenges or uncertainties in their products and processes. The scheme is administered by HMRC.
Large or small – there’s an R&D tax solution for your company.
There are different types of R&D relief. Deciding which scheme to use is largely dependent on the size of your business, but there are other factors that need to be taken into account.
Not sure which R&D tax credit scheme to use?
It only takes a few seconds to find out which scheme is the best fit for your business*.
Start by answering the following questions:
Talk to us about which R&D tax relief scheme will work for you
Even though your business is probably classified as an SME we have identified some reasons why you might not be eligible for the SME R&D scheme. However, you may well be able to claim through the RDEC scheme instead.
*If your business has external investors this can affect your SME status. You may need to include the figures of connected companies and partner companies when you work out if your business is an SME and decide which scheme is best for you. If you are in doubt then speak to us and we’ll run through the numbers with you.
Why choose GovGrant?
We match you with an industry, commercial or Technical Specialist that best suits your business. Irrespective of size and complexity, we will find the right Technical Specialist who can add the most value to your claim.
We work alongside your accountant to complement their skills so there is no conflict. Your relationship with your accountant won’t be adversely affected.
How to claim your tax credits
We want to work with you to get the best results for your business. With GovGrant every step will be easy and transparent.
1. Get in touch
The first step is to ﬁnd out a little bit about your business, to understand how we can help you.
If we don’t think we can help at all, then we’ll let you know.
2. Agreeing how we work together
We set out what we can do for you, when we will do it and what we will charge. Everything is transparent. We hope the only surprise will be how much you can successfully claim.
3. Initial qualification
You will be matched with a Technical Specialist, who will best understand your business and speak your language. We need to review your financial information to assess if a claim will be worthwhile and to give you an estimated claim value.
4. Getting to know your business
We will introduce you to your technical team and arrange initial meetings. They will spend some time on site with you to identify the areas where a claim can be made – we know where to look.
5. Putting your best claim together
Taking the things that we’ve learnt about you, we will work with our tax experts to pull everything together. We know what HMRC are looking for and what makes a successful claim. The first draft is reviewed twice internally before we send it for you.
6. Your report
We may need some follow up information to evidence the claim.
The report is sent to you for approval and this will give you the size of the claim. We are authorised to submit a claim to HMRC on your behalf.
7. Dealing with HMRC
If HMRC come back with further questions then we will of course deal with them for you. Your award will come to you as a cheque or a tax allowance – usually within a month of submitting a claim.
8. Receiving the benefit
We invoice once we’ve had confirmation of the claim paid.
You only settle your GovGrant invoice once you’ve received the grant or tax relief.
Already claiming R&D tax credits?
Even if you have made a tax credit claim in the past there is every chance that we can improve on it. On average, we have increased existing tax credit claims by 200%, because we know how and where to find the full potential of your claim.
When you sign up with GovGrant you know that you will be in safe hands, and not just for the future. One of the first things we’ll be able to do is go back for two years to do all we can to improve your claims and reports. So that opportunity isn’t lost.
Below are some frequently asked questions about making R&D tax relief claims. If you have any further questions please contact our team who will be happy to advise you.
In the UK companies are able to claim tax relief for their R&D activity. The schemes, for SMEs and larger companies, are both administered by HMRC. Typically SMEs get back up to 33% of the amount they’ve spent on qualifying R&D. RDEC qualifying companies could get more than 10% of their R&D spending refunded.
You can claim R&D relief by entering the total qualifying expenditure on the full Company Tax Return form, CT600. Tax relief is given as either a reduction in the tax liability or, if the company is in losses, a refundable tax credit payable as cash on the amount of qualifying R&D expenditure.
No, the company can be in a loss position. These losses can then be utilised (i.e. not carried forward for tax relief in the future) and the company receive an R&D cash refund, without paying any corporation tax.
One of the requirements for an R&D claim is that the qualifying costs are included in the accounts and are allowable for tax purposes.
Therefore, we need to check that the qualifying costs are included in the relevant accounts either in the profit and loss account or Intangible fixed asset additions and also that they are not disallowed in the tax computation.
For tax purposes, R&D takes place when a project seeks to achieve an advance in overall knowledge or capability in a field of science or technology.
You can claim against certain costs that are allowable for tax purposes on the project including:
- Employment costs to the company including salaries, bonuses, some reimbursed costs, employers Class 1 National Insurance contributions, employers pension fund contributions
- Subcontractor costs (certain restrictions apply if you are claiming under the RDEC scheme)
- Externally Provided Workers (EPWs)
- Software (revenue costs)
- Consumable items including materials and utilities like light and heat
- Clinical trials volunteers in the pharmaceutical industry
Within the SME scheme, a company can claim subcontractor costs (UK or overseas) for direct R&D activities, but for the RDEC scheme the subcontractor rules are more restrictive.
Yes, employees and externally provided workers (EPWs) are the only qualifying costs where indirect R&D activities can be claimed (i.e. subcontractors cannot claim for indirect R&D activities)
For SMEs, outsourced subcontractor costs (in the UK or overseas) that are undertaking qualifying direct R&D activities are allowable costs and can be included in the R&D claim. There is however a statutory deduction of 65% from the costs if the subcontractor is not connected or deemed to be connected to the company.
Generally, if the grant funding is “State Aid” then the company will need to make a claim under the RDEC scheme (even if they would normally qualify as an SME).
R&D tax relief may reduce your company’s tax bill if your company is liable for corporation tax or, if you make a loss, you may be able to surrender this loss and claim a tax credit. The R&D schemes enables companies with no corporation tax liability to benefit through a cash payment or a reduction of tax.
HMRC may reject an R&D claim, but they will firstly request further information, either Technical or Financial about the R&D claim before this is actioned. This is normally called an ‘HMRC Enquiry’.
Once the questions from HMRC have been addressed, HMRC may conclude either, that there is no qualifying R&D activity and reject the claim in full, or if they agree that there is some qualifying R&D activity but this is not represented by the size of the claim, they will reduce the R&D claim to fairly reflect the qualifying R&D activities undertaken by the company.
As a GovGrant customer if you face an HMRC enquiry we will defend it on your behalf at no extra charge. We have an enquiry rate of less than 0.2% compared to the industry wide average rate of 14%.
Are R&D tax credits available to companies in my sector?
We find that companies from all sectors and all industries have the potential to claim UK R&D tax relief.
Follow the link below to find out more.
Ensure your business recognises and receives the full credit it is due with GovGrant’s IP services
The Patent Box is closely linked with R&D tax relief and a company can often claim tax relief under both schemes.
GovGrant can offer you advice to maximise your claims across both schemes. Find out more about our IP services including Patent Box.
I liked the way my analyst understood our company’s activities and which ones qualified for the R&D scheme.