R&D Tax Credits

R&D Tax Credit Consultants Ilford

Research and Development (R&D) credits are available to pioneering companies, typically those that work in the field of science and technology. These credits come in the form of tax reliefs, which are awarded to certain research projects, even if they ultimately prove to be unsuccessful. Essentially, R&D tax credits are designed to reimburse businesses for money spent on essential research and development items. And, what might at first appear to be a loss on your profit and loss account can more often than not be turned into a gain.

Which businesses qualify for R&D tax credits?

Provided you run a company (as opposed to an unincorporated business) that employs no more than 500 employees, has an annual turnover of no more than £100 million and a balance sheet that amounts to no more than £86 million you can claim. There are other caveats, however. For example, a company that is undergoing administration or liquidation is not entitled to R&D relief. Of course, we can advise you on all possible scenarios. And as far as HMRC is concerned, you can rely on us to prove to them that your project – or projects – falls in line with British Standards Institution guidelines as regards R&D tax credits.

R&D tax credits cover the following:

  • Money spent on consumables and materials involved in the R&D process, including power (e.g. heating and lighting)
  • Money spent on software related to the R&D process
  • Money spent on freelancers and/or subcontractors pertaining to R&D
  • An employer’s R&D-related salaries, National Insurance contributions (NIC) and pension contributions

Entrust our Ilford accountants with the handling of your business’ R&D relief

We’re here to help with your entire R&D accounting needs while ensuring that full compliance is met. For more information and advice regarding this form of tax relief – or how to get the most out of any other government incentive, please click on the contact our r&d tax specialists in Ilford by clicking the contact us tab at the top of the page to get in touch with us.

R&D Tax Credit FAQs

A range of costs qualify for R&D tax relief, including staff salaries, employer’s National Insurance Contributions, subcontractor payments, materials and consumables, and some types of software. Those paying subjects of clinical trials can also claim these payments back.

Small businesses – that is, businesses with fewer than 500 employees and a turnover of no more than €100 million – can claim up to 33p for every £1 spent on eligible R&D activity.

Large businesses (those with over 500 staff and either €100 million or more turnover or €86 million or more gross assets) can claim up to 11p for every £1 they spend on qualifying R&D activities.

If your business is spending money on qualifying R&D activity, you can make a claim to receive either a cash payment or a reduction in your Corporation Tax bill. Making a claim can be complicated, so it’s advisable to engage an R&D tax accountant to handle the claim on your behalf.

There’s a huge amount of scope for claiming R&D tax credits, whatever the industry you’re working in. From manufacturing to food processing to construction, if you are innovating in a way that could benefit your whole sector (as opposed to only your business), and haven’t accepted certain types of grant, you may be able to make a claim. Speak to our experts today to find out if your activity qualifies for research and development tax relief.

If you choose to receive a cash payment from HMRC, you should have the money within 28 days. Corporation Tax repayments can be quicker, reaching your account in as little as a week.

As with all tax matters, the relevant forms and documentation must be sent to HMRC in order to claim relief. You’ll need to provide the total qualifying expenditure – typically with notes on how this figure was reached. You can record your R&D expenditure on your accounting software, preferably with a dedicated tag so that it doesn’t get mixed up with other expenditure.

Of course, you can always engage an accountant to help with the recording of your R&D expenses and the filing of your returns so that you can claim the maximum possible sum.

Any HMRC R&D tax credits received by your company are non-taxable income, and will either be paid as a cash credit, or will be shown as a reduction on your Corporation Tax bill.

Many businesses – particularly SMEs – find the prospect of completing an R&D claim daunting, and therefore elect not to make one. However, making a claim could make all the difference to your efforts – and your ability to continue developing your products and services. In the financial year 2019/20, the average claim for SMEs was £57,330.

The time limit for claiming R&D tax credits is two years from the end of the accounting period to which the claim relates. Each claim should relate to a specific project, which may span multiple years. In such cases, you can make multiple claims for one project, as long as you clearly indicate how the activity has differed from one year to the next.

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