Qualifying for an R&D Tax Credit claim
According to HMRC, since the scheme was launched, over 141,000 claims have been made, and almost £14 billion in tax relief has been claimed.
We can provide a free, no obligation assessment over the telephone of your potential to claim.
To be eligible under the terms of the R&D Tax Credit scheme, companies have to be engaged in technical development work in engineering, science or technology, and there needs to be a technical advance in the work being undertaken.
Companies developing new, or improving existing, products or business systems or production processes, that are tackling “technological uncertainty”, are likely to qualify. In our experience 95% of claims are about ‘development’ rather than ‘research’. Initial claims can go back two years from the company’s financial year-end.
What claims must demonstrate
Claims need to:
- Clearly show the technical advances
- Describe the technical uncertainties and challenges faced
- Show the steps taken to overcome the uncertainties, and
- Identify the value of qualifying development work.
There are two schemes, one for Small and Medium Sized Enterprises (SMEs) and one for Larger companies:
The SME scheme
A company engaged in development work should be eligible to make a claim under the SME scheme if it:
- is ‘Limited’
- has fewer than 500 employees
- and either a turnover of no more than £100m, or a gross balance sheet not exceeding £86m
The R&D Expenditure Credit (RDEC) scheme (larger companies)
Larger companies falling outside the SME criteria can claim under the R&D Expenditure Credit (RDEC) scheme. RDEC can also be claimed by small and medium-sized enterprises (SMEs) who have been subcontracted to do R&D work by a large company or who have received a grant or subsidy for their R&D project.
The scheme allows loss-making organisations to ‘surrender’ R&D tax losses for cash, or to be carried forward against future profits.
Calculating claim value
Claim value is based on the cost of qualifying work, including:
- Payroll costs for staff involved in technical development
- Subcontract costs (applicable to claims under the SME scheme)
- Materials (including software licences)
- Utility costs (electricity, gas, water, fuel oil etc.)
- Development-related expenses
Not sure if your business qualifies?
Alternatively, we can provide a free, no obligation assessment over the telephone of your