R&D Tax Relief Reviews & Computations
It is a common misconception that the relief is only available to companies who are working in new technologies or have people in white coats working with test tubes. However this is not the case as the relief is available to any UK based company which incurs costs on being innovative in their respective field.
In 2016/17 over 38,000 companies, mostly small or medium sized took advantage of the relief with over £3.5 billion in additional tax relief claimed. However it is still believe that the relief is still only being claimed by a
fraction of the companies which qualify.
Companies can make a claim for accounting periods which ended within the previous two years which means that, when first making a claim, a company can usually claim tax refunds for two accounting periods.
It is not necessary for the R&D project to be successful or complete in order to make a claim.
key r&d stats
- 36,820 – number of small or medium sized companies who claimed R&D tax relief last year
- £220 million – amount of R&D tax relief claimed by companies in the North-West last year
- £3.7 billion – total amount of R&D tax relief claimed
- 4,465 – companies in the North-West who claimed R&D tax relief
- £655 million – amount of R&D tax relief claimed by companies in the Information & Communication sector
- £1.05 billion – total tax refunds to loss-making companies
- 12,530 – companies who made a claim for the first time
How it works
Companies which invest in new or existing processes, products or services are able to claim additional tax relief equal to 130% of the qualifying expenditure. Based on a profitable company paying corporation tax at 20% this would result in a tax saving of 26p for every £1 on top of the “normal” 19p tax saving the expenditure would generate. This means that the Government is contributing nearly 44p towards every £1 of your R&D expenditure.
In the event that the Company is loss-making, the Company can surrender its tax relief in return for a tax refund from HMRC meaning that for every £1 spent the Company can receive 33.3p back.
It normally takes around 4 weeks for HMRC to process the R&D relief claim meaning that tax refunds are usually received within a month of making the claim.
do you qualify?
There are no restrictions on which industries qualify for the relief meaning that any company in any sector can qualify. If you can answer “Yes” to either of the following two simple questions there is a good chance you will qualify for the relief:
- Are you spending money developing new products, processes or products or improving existing ones?
- Do you employ staff to work on projects which advance the knowledge or overcome uncertainties within your trade?
what expenditure qualifies?
Examples of the types of expenditure which will qualify for R&D relief are:
- Staff costs including salaries, National Insurance and pension contributions.
- Expenditure on materials and consumables including utility costs.
- Some types of software expenditure.
- Subcontractor and freelancer costs.
Case study 1
ABC Limited is a manufacturing company looking to re-engineer one of its existing products to enable it to work in a new environment. The Company spent £200,000 on re-engineering the product in its accounting period ended 31 March 2018 and the expenditure went through the Company’s Profit and Loss account in the normal way saving £38,000 in corporation tax. However an additional £260,000 R&D relief was available which enabled the Company to reduce its corporation tax bill by a further £49,400.
Case study 2
DEF Limited is a relatively new software development firm which spends £100,000 developing a new phone application in the accounting period ended 31 March 2018. The £100,000 is treated as an allowable cost to the Company, however as the Company has made losses in this period there is no immediate corporation tax saving.
The Company therefore elects to surrender the loss in return for a tax refund from HMRC and receives £33,350 back which provides vital cash-flow to the Company.
How we can help
We have a successful track record in helping companies put together R&D tax relief claims in all types of industry sectors including manufacturing, software development, retail and leisure.
We will take a hands on approach led by an experienced Chartered Tax Adviser to ensure that all qualifying expenditure is included in the claim.
We will prepare a detailed report setting out for HMRC the R&D work undertaken by the company and quantifying the tax relief due and submit this to HMRC along with amended Tax Returns where necessary.
In the event that HMRC raise questions in relation to the claim we will answer these on behalf of the company.
All of our work is undertaken on a contingent fee basis meaning that if, after discussions it is concluded that the company does not qualify for R&D tax relief or, for whatever reason, HMRC do not accept the claim, we will not charge a fee.
Speak to us today to see if you’re eligible to make an R&D claim.