Research and Development Tax Relief (R&D)
DTE Business Advisers have helped companies take advantage of the Government’s tax incentives for research and development, generating reliefs of over £20 million for our clients since 2011.
What is R&D tax relief?
R&D relief allows companies to claim an enhanced deduction for qualifying expenditure on research and development activities. Larger companies (and smaller, loss-making companies) may convert the claim into a repayable tax credit. Therefore, you may be able to claim a tax refund without having paid any tax. There is also a chance your company is undertaking R&D without knowing it.
Benefits for SMEs
The SME R&D scheme provides:
- An enhanced tax deduction of 130% for each £1 spent on qualifying R&D (125% before 1 April 2015), and
- For companies that are not yet profitable, losses can be surrendered for a cash credit from HMRC (currently 14.5% of available losses).
R&D for tax purposes takes place when a project seeks to achieve an advance in science or technology.
The activities that directly contribute to achieving this advance in science or technology through the resolution of scientific or technological uncertainty are R&D.
Certain qualifying indirect activities related to the project are also R&D.
Projects which seek to:
- make an appreciable improvement to an existing process, material, device, product or service through scientific or technological changes; or
- use science or technology to duplicate the effect of an existing process, material, device, product or service in a new or appreciably improved way (e.g. a product that has exactly the same performance characteristics as existing models, but is built in a fundamentally different manner)
will be R&D
R&D includes the adaptation of knowledge or capability from another field of science or technology where this adaptation was not readily deducible.
What can be claimed:
- Salaries, wages and bonuses
- Employer's pension contributions
- Employer's NIC
- Employees' reimbursed expenses
- "Consumable" overheads e.g. heat, light, water
- Materials, components and other consumables
- Software costs
- Subcontracted work on R&D
- Expenditure on externally provided workers, e.g. agency workers
What cannot be claimed:
- Benefits in kind
- Rent, rates, insurance etc (not "consumable")
- Beware of the impact of subsidies and grants
R&D isn't limited to work by scientists in white-coats nor is it limited to manufacturing companies. Far from it, any activity where a company has overcome a technical or scientific challenge to improve its products or processes can qualify. This could be seeking an improvement or efficiency in relation to not just products but also systems, processes, software design, integrating different parts of a business/system to talk to each other to name a few examples.
A few areas where we have assisted clients include:
- Construction and civil engineering
- Pet foods manufacturing
- Human food and ingredient manufacturing
- Waste recycling
- Software development
- Beauty and skincare product development
- Electrical and mechanical contracting
- Moulded rubber component manufacturing
- Smart metering
- Chemical manufacturing
- Machinery and component manufacture
- Software integration
- Lift installations and design
- Graphene applications
- Communication systems
How we can help
The team at DTE would be happy to undertake a complimentary initial review as to whether we believe there is scope for claiming R&D reliefs in a company. Our experience in making successful submissions to HMRC (we have a 100% success rate) means that client’s claims are typically processed swiftly by HMRC.
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- Research and Development Tax Relief (R&D)
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