Understanding how to make R&D tax credits work for you – Join our webinar on 15 February to learn more
Many business owners have started to look for ways to reduce their corporation tax liability to HMRC. The number one incentive we have used to help companies save millions is Research and Development (R&D) tax credits. Click here to join our webinar on 15 February and understand how you can benefit too.
What is Research and Development?
R&D is any activity carried out by companies to develop new or existing products, processes, or services, and can be claimed whether a project was successful or not.
Who qualifies for R&D?
Most people we speak to assume that R&D can only be claimed within the science or technology industry, however, we have completed many claims within a wide range of sectors including property, manufacturing, and sports related entities.
Tax planning?
There is a two-year time limit from the end of your accounting period for claims, which means that you can utilise any R&D benefits in the most tax efficient way. So, for example:
- You can choose to offset the R&D against the current year corporation tax and carry back against prior year liabilities; or
- Carry forward the R&D loss in full; or
- Apply for a tax credit from HMRC.
What classifies as qualifying costs?
The scope for R&D is so wide, however there are basic costs that can be claimed, if the costs are revenue expenditure i.e., day to day operational costs. Capital expenditure is not usually eligible.
Revenue expenditure includes the following costs:
- Staffing costs: this can include gross salaries, employer NIC, and pensions
- Software: revenue expenditure only
- Consumables: for example, materials used to produce the product
- Subcontractors: note there are some new restrictions on subcontractor costs going forward so it’s always best to check with an expert
- Cloud based costs
In recent years, we have advised a number of business owners who did not believe that they were eligible and have reclaimed over £1m in R&D costs for them.
