WHAT ARE R&D TAX CREDITS?
Research and development (R&D) tax credits are a UK tax incentive that reduces the cost of your corporation tax bill. This tax relief is open to any business (large or small) that can demonstrate scientific or technological advances within a specific industry or sector – so it’s not just for scientists in white coats!
To get R&D relief you need to explain how a project:
- looked for an advance in science and technology
- had to overcome uncertainty
- tried to overcome this uncertainty
- could not be easily worked out by a professional in the field
A RELIEF THAT’S OPEN TO ALL
Tax reliefs are government-approved incentives that allow you to reduce your tax bill – which is great news for your cashflow.
The R&D tax credit scheme is open to all businesses – however small your company may be. Whatever sector you’re in, however small your niche may be, if you’re pushing the boundaries of science or technology then there’s a good chance that your project will qualify for this tax relief. If you think there’s a claim, Αpply for the R&D Relief!
FAQs
Based on HM Revenue & Customs’ (HMRC) guidelines, your project can be seen as R&D when ‘a project seeks to achieve an advance in overall knowledge or capability in a field of science or technology’.
To help you understand if your project qualifies as R&D, try asking the following questions about the project:
- Does your project solve a problem that no existing product, software tool, app or service on the market can solve?
- Do you make products that are new or are improvements on products that are currently on the market?
- Have you ever had to close down an existing development project because you’ve reached a dead end?
- Do you employ a developer or an engineer within the business – either in-house, remotely, or as a contractor?
If you can answer yes to one or more of these questions, your project will most likely qualify for R&D tax credits.
These are the main areas of expenditure which you can claim against your R&D costs when making a claim:
- Salaries of staff involved in R&D projects (proportioned for the amount of time spent focused on R&D projects).
- Expenditure on subcontracted work or externally provided workers.
Expenditure on consumables (utilities, materials and software) related to your R&D projects.
The way you claim will depend on the nature of the subcontracting relationship:
- If you contract out a percentage of your R&D project work to another business, it qualifies as eligible expenditure for your R&D tax credit claim.
If you have been contracted to work on part of another business’ R&D project, you may be able to claim for the associated costs under the RDEC scheme.
It’s possible that you won’t be eligible for the SME R&D tax credit scheme if you’re already receiving some form of financial aid as a business. Some of your project costs may be eligible for funding via the RDEC scheme. However, it is possible in some instances to combine grant funding and R&D tax credits to maximise your potential funding.
Get Started with CLOUD R&D
Cloud R&D provides a one-stop DIY solution for you to make your own R&D tax claims – without the need for hiring expensive R&D consultants and tax advisers. The most effective way to claim R&D tax credits.