If you are a UK SME and undertake any form of research and development then you could reduce your corporation tax bill by 130% of your R&D spend.
If you are loss making this can be carried forwarded or claimed as cashback. Claims can be made for two years previous and the average size claimed back is £43,000
The R&D tax credit scheme is still one of the most under utilised SME funding schemes in the UK due despite the quick application process and significant sums on offer.
What qualifies as R&D?
R&D doesn’t have to involve white coats or take place in a lab, it can be as simple as re-configuring a machine to work for your business or developing an innovative new business process. In the last two years;
- Have you made any bespoke or customised products?
- Have you made any efficiency improvements to your processes?
- Have you carried out any in-house design work or prototyping?
- Have you developed any new products or launched something new to market?
- Are you regularly problem solving to meet your customer’s needs?
If you can answer yes to any of these questions then you could have a substantial claim.
Which costs qualify for R&D Relief?
To qualify as R&D, the activity must contribute directly to seeking the advance in science or technology or must be a qualifying indirect activity. Eligible costs include;
- Employee costs – that is, employing staff directly who are actively engaged in carrying out R&D
- Staff providers – paying a staff provider for staff provided to the company who are directly and actively engaged in carrying out R&D.
- Materials – consumable or transformable materials used directly in carrying out R&D.
- Utilities – power, water, fuel used directly in carrying out R&D, but not things like telecommunication costs and data costs.
- Subcontracted R&D expenditure – can be claimed at a third of the rate of the subcontractor cost.
Making a claim
The scheme is open year round and the application process can be completed in 3 weeks, with claims approved within 8 weeks. Claims can also be made retrospectively, on R&D spend from two years previously.
The average claim size is £43,000 and there has never been a better time to claim, with the UK government actively trying to stimulate further R&D investment.