Research & Development Tax Incentives
Why make a claim
- For a profitable company: to reduce its corporation tax bill
- For a loss-making company: to claim cash from HMRC in the form of R&D tax credits or repayable research and developments expenditure credits
- To improve the company's cashflow
- To make the company's balance sheet look healthier
- To increase the company's reserves
COVID-19 financial support: Impact on R&D claims
The Government announced in December 2021 measures of financial support for businesses. One of the measures of financial support is the reintroduction of the Coronavirus Statutory Sick Pay Rebate Scheme. While this support will be welcomed by many companies, it is important that those that want to make use of the UK’s R&D tax credit schemes think about whether claiming this government support will impact their ability to benefit from the R&D tax credit scheme for SMEs. Early information on the new measures was initially limited, but HMRC has confirmed that claiming the rebate will potentially restrict a company’s ability to claim the more beneficial R&D tax credit for SMEs. This applies where the rebate is provided in respect of a qualifying R&D project. In such situations, a claim for the less favourable RDEC tax credits may be available.
Companies should claim the financial support where it is needed and particularly where it is not in conflict with other measures, such as relation to a qualifying R&D project. If the claim for COVID-19 financial support is in relation to a qualifying R&D project, they should weigh up whether the financial support plus a possible claim for RDEC credits provide a greater return than a claim for the SME R&D tax credits scheme. To discuss how the announcements will impact your organisation please get in touch with Stuart Weekes or your usual Crowe Contact.
What are R&D tax credits
Our experience is that many companies have not realised the full extent of the R&D tax credits available to them. Any UK company that is looking to develop new products or processes, or to improve its products or processes, may be entitled to claim this relief.
Our specialist Innovation Taxes team are experienced in helping companies to maximise their R&D tax credits.
We have helped all sizes of companies across a wide range of sectors, not just technology and research based companies.
How much is an R&D tax credit claim worth to my company?
If your company is carrying on R&D you can claim R&D tax credits under either the SME R&D scheme, the Large company R&D scheme.
In certain circumstances where your company is a subcontractor, or has received a grant or subsidy to help with the R&D, it may be either wholly under the Large company R&D scheme (irrespective of the size of the company) or it may be partly under the SME R&D scheme and partly under the Large company R&D scheme.
Large company scheme
- Under the Large company scheme, companies claim a 13% (12% for pre April 2020 R&D spend) 'research and development expenditure tax credit' (RDEC).
- This is taxable, but is offset against a company's tax liability. This is equivalent to a £10.53 reduction in tax liability for every £100 of R&D spend (or £9.72 for R&D spend in the period 1 January 2018 to 30 April 2020).
- Where a company is loss-making, or has insufficient tax liability against which to offset the RDEC, a company can generally claim cash from HMRC at the same rate.
SME Scheme
- Under the SME scheme, R&D tax relief is an additional 130% tax deduction beyond the 100% normally available.
- This is equivalent to a £43.70 reduction in tax liability for every £100 of R&D spend.
- Loss making companies can cash-in R&D tax losses at up to £33.35 for every £100 of R&D spend.
Is my company carrying on R&D?
A project needs to meet two criterion to be eligible for R&D tax credits. Firstly, it has to seek to achieve an advance in knowledge or capabilities in the field of science or technology, and secondly the advance has to be through the resolution of technological uncertainties.
The main obstacle for many is understanding what R&D means and if your company is actually doing it.
Is my company eligible to claim R&D tax credits?
Click on your sector below to find out if you are able to claim using our simple questionnaire.
What costs are eligible for R&D cash tax credits?
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Employee costs, including gross salaries, NIC'ers and company pension costs and some reimbursed expenses. |
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Subcontractor costs and employee costs of other group companies helping with the R&D. |
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Materials, consumables and prototype costs. |
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Software costs. |
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Light, heat and rates. |
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Rent, rates and office overheads. |
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Stationery, printing, postage and telecommunications. |
Why choose Crowe?
By taking the time to get to know your business we can not only maximise your R&D tax credits, but this will also help us to spot other tax and business opportunities for you.
Whatever stage you are at in the intellectual property lifecycle, whether it be research, exploitation, growth, or planning for succession or exit, we are a multi-disciplined business with the expertise to help your business throughout its end-to-end journey.
How we help our clients
We can help you maximise the available benefits by:
- identifing R&D projects
- preparing and submitting your R&D claims to HMRC
- reviewing and replacing previously understated claims.
- helping set up internal procedures to capture R&D data.
- helping maximise the benefit from R&D tax losses.
Helping your business make the most of its assets by looking at tax incentives.
