R&D tax relief – could your company claim?
R&D is an often-overlooked tax relief that’s available for small and medium-sized companies, (SME’s), allowing them to claim for research and development expenditure. The amount of relief depends upon the scheme utilised and it only applies to limited companies, not sole traders, partnerships or LLP’s. The SME scheme allows relief at 230% on qualifying costs and reduces corporation tax payable. Even companies making a loss can apply under the research and development expenditure credit scheme (RDEC) which allows for a fully payable tax credit, either as a cash payment or a reduction against other liabilities due to HMRC. Claims can be made on a back-dated basis up to two years after the end of the accounting period.
To qualify, your company must be carrying out R&D work. R&D means ‘white coat’ scientific research and ‘brown coat’ development work in design and engineering. R&D relief is all about innovation, so could involve software development, engineering designs, a new construction technique or new products or processes in bio-energy, cleantech, agri-food and life and health science sectors. The costs that usually qualify are salaries, wages, Class 1 NIC and pension contributions for any staff engaged in the project as well as supervisory and managerial time, software and consumables. Capital expenditure doesn’t qualify.
In 2015, HMRC introduced Advance Assurance for companies who establish a blueprint in the first year which then follows for three years, effectively giving 3 years clearance from HMRC.
What to consider before making a claim
- Does your company have a defined project?
- Is this innovative and an advance in a field of science or technology?
- Does the advance extend to the field of science of technology or just improve the company’s own knowledge?
- Does the project involve uncertainty that cannot be resolved by competent professionals and involve new solutions that are not common knowledge?
R&D claims may appear complex but CFW has experience in helping clients make successful claims in many areas. While you will always be involved in the drafting of the technical back up to accompany the claim, CFW is here to help clarify the detail and guide you through the process.
To find out more about R&D tax relief, drop into our Kettering offices and make an appointment or contact CFW Accountants on 01536 713555 for an initial, informal discussion.