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57% of businesses are eligible for receiving R&D tax credits however only 1% have actually gone through the process of successfully claiming the relief.

Black and White Accounting works with many clients across Hampshire and Surrey helping them to claim the R&D tax credits to which they’re entitled.

Do you qualify for R&D tax relief? Read our quick guide below and get in touch if you believe that one or more of your activities makes you eligible for the scheme.


R & D tax credits UK

To qualify, there has to be some element of uncertainty in an R&D project run by your company with the end goal of the project being a technological or scientific advance. The advance has to be significant enough so that an expert in that field could not work out how to do without conducting their own thorough research and development. Your project does not have to succeed in order to be eligible.

Your R&D project could involve the creation of a brand-new process, product, or service. Additionally, R&D projects seeking to amend and improve an existing process, product, or service are also eligible. On completion, your project does not have to then be sold to third-party users – it can be used internally to improve your business processes and practices.

You can also claim for R&D project work given to you by another company as well as R&D projects carried out by your own firm.


R&D tax credit claim – what can you claim for?

You can claim for the following expenses related to your R&D project –

  • capital expenditure (this is done under the specific R&D allowance scheme)
  • software used on the project
  • payments to clinic trial volunteers
  • any materials (transformable or consumable) used in the project
  • fuel, water, gas, and electricity used in the project

The following labour-related expenses can also be claimed back:

  • employee costs for those involved in the project (you need a contract of employment for each employee)
  • companies providing staff to you where those staff are involved in the project
  • subcontractors involved in R&D (up to 65% on any contractor whose arrangement with you falls outside the scope of IR35)

You may not claim for:

  • recruiter fees
  • telecoms costs
  • data costs
  • any consultant, staff member, director, or agency worker whose employment contracts are with other companies, who are not supplied via a staff provider, or who are not subcontractors

SME qualification for R&D tax credits

For SME R&D relief, we have a long track record of experience in claims assistance. To qualify, you need to have a turnover of less than €100m, gross assets of less than €68m, and fewer than £500 staff.

The average successful claim for R&D tax credits is around £43,000.


R&D tax credit calculation example

R&D tax credit rates allow you to claim 230% relief on your allowance R&D expenditure. That means that, for every £1,000,000 your company spends on R&D, you’re able to reduce your corporation tax by an additional £1,300,000 in addition to £1,000,000 sunk into the project.

Here is an R&D tax credits example claim for a profitable company

Amount
Taxable profit£1,300,000
Amount spent on R&D£1,000,000
R&D relief£1,000,000 * 130% = £1,300,000
Profit less calculated R&D relief£1,300,000 profit – £1,300,000 R&D relief = £0
New taxable profit£0

Here is an example of a company losing money choosing to carry that loss forward or back and using their R&D relief…

Amount
R&D expenditure£1,000,000
R&D enhancement£1,000,000 * 130% = £1,300,000
Taxable loss£500,000
Loss post R&D tax credit enhancement£500,000 + £1,300,000 = £1,800,000
Loss that can be carried back or forward£1,800,000

If a company wanted a cash credit rather than carrying a loss back or forward, this is what they would receive…

Amount
R&D expenditure£1,000,000
R&D enhancement£1,000,000 * 130% = £1,300,000
Taxable profit for a year£500,000
Loss post R&D tax credit£500,000 – £1,300,000 = £800,000
R&D amount available to convert to credits£800,000
Potential tax credit£800,000 * 14.5% = £116,000
Carry back or forward loss£0

R&D tax credit at HMRC

HMRC will expect you to present them with the details of the money invested on allowable R&D spend and a description of the project itself. They will want to see records of all the costs associated with your project and how they were incurred together with how you calculated the amount of tax credit you’re claiming.

You then enter your claim onto your CT600 corporate tax returns into the applicable R&D tax credit boxes.

If your business is profitable, your corporation tax payment will be reduced by the credit. If you’ve already paid corporation tax for the relevant period, you’ll receive a refund.

If you choose a cash payment instead, this will be paid directly into your nominated bank account that you have registered with HMRC within four to six weeks of HMRC receiving your CT600.

For companies wanting to carry back or forward a loss, you receive no payment from HMRC, rather the loss will be shown on a revised past or a future CT600 form.


Are there any activities in your business which might qualify? We’re very happy to help you find out and lend you our expertise in making a successful claim.
Please use the form below, call us free on 0800 140 4644, or you can email [email protected].


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