Millions of pounds of R&D tax relief go unclaimed every year in the UK by innovative businesses.
This significant amount of lost tax relief could revolutionise the financial outlook of thousands of businesses across a variety of sectors.
With so much on offer, could your business benefit from this generous tax credit scheme?
Research and development (R&D) tax relief – also known as R&D tax credits – was launched by the Government to reward companies in the UK that invest in innovation.
These tax credits are a valuable, if underutilised, source of support to help businesses invest in R&D, hire new talent and grow to achieve great results.
R&D tax relief allows you to claim either a reduction to Corporation Tax or cash if the development leads to a loss against the development of new products, processes or services or enhancements to existing ones.
To be eligible for this relief, the innovation must overcome a scientific or technological uncertainty that could not otherwise be solved by an expert in the field.
There is a perception that this relief is only on offer to those working in high-tech sectors, but this couldn’t be further from the truth.
This initiative is open to businesses in almost every sector as long as they can prove they have made an advancement.
HMRC has received successful claims in several sectors, including:
Within the scheme’s accepted research and development definition, R&D doesn’t even have to have been successful to qualify and you can also include work undertaken for a client.
Am I eligible for R&D tax credits?
To benefit from R&D tax credits, you must:
Depending on the type of business, the scheme available may differ. For accounting periods from 1 April 2024, the merged R&D Expenditure Credit (RDEC) and Enhanced R&D Intensive Support (ERIS) schemes replace the previous RDEC and Small and Medium-sized Enterprise (SME) schemes for accounting periods beginning on or after this date.
While the qualifying expenditure rules remain the same, the method of calculating the benefit differs between the two schemes.
Under the merged scheme, the R&D Expenditure Credit (RDEC) is calculated at a rate of 20 per cent.
The enhanced ERIS scheme offers additional support for loss-making, R&D-intensive SMEs, where its relevant R&D expenditure is at least 30 per cent of its total expenditure.
These companies can:
The amount of relief a business receives depends on its R&D spend and a number of other factors.
To calculate the R&D tax credit, a business will need to identify qualifying expenditure and look at the relevant rate for the business to create a calculation for your enhanced expenditure.
When you deduct your enhanced expenditure from your taxable profits or add it to your loss, it will result in one of three outcomes:
Businesses should be aware that expenditure is only enhanced under the SME scheme but not RDEC.
What costs qualify for R&D tax credits?
When submitting an R&D tax credit claim there is a wide variety of expenditure that can be covered, including:
This tax credit applies to the two previous accounting periods. If you have already completed work in the last couple of years you may still be eligible to apply.
Our team at Grunberg have an exceptional record for helping firms of all sizes and sector make successful R&D tax credit claims.
By seeking out professional advice and support you can remove the stress of making a claim and significantly improve your chances of success.
If you need friendly and proactive guidance on R&D tax credits, our experienced tax team are here to help.
Our great people are dedicated to businesses achieve great results, so please contact us today.
