R&D Tax Credits Guide

RDP Associates breaks down and explains the R&D Tax Credit guide for SME’s (small business R&D) and RDEC (Large businesses).

WHAT ARE R&D TAX CREDITS?

R&D tax credits is a government sponsored programme designed to incentivise and reward UK companies for undertaking innovation activities. The programme provides companies with tax benefits that can include, reduction in corporate tax liability and /or cash which can be reinvested back into the company. Such as hiring new staff or funding the company’s R&D development activities, enabling corporate growth.

IS MY BUSINESS ELIGIBLE FOR R&D TAX CREDITS?

So, if you have not claimed before and are uncertain if you are eligible, our R&D eligibility checker will tell you in 30 seconds.

R&D Tax Credits Guide

WHO QUALIFIES FOR R&D TAX CREDITS ?

SMEs (Small business R&D) and Large companies (RDEC) that invest time and resources in developing new and/or improved products, processes, formulas, techniques, and services are eligible for R&D tax credit. So if a company is spending money on innovation activities, companies can receive either a cash benefit, refund, or a reduction in corporation tax liability. For more information on eligibility here are RDP’s 6 P’s.

WHAT COUNTS AS R&D/ WHAT ARE QUALIFYING ACTIVITIES?

HMRC’s definition of what is considered R&D is broad in nature. But whether you are an SME (Small business R&D) or Large company (RDEC) spread across several industries, a company is required to undertake project(s). Which are unknown as to whether a solution is achievable or not. By having an unknown, a company is incurring a risk so therefore carrying out R&D activities.

Furthermore, a company that has undertaken a given project that requires resolving a scientific or technological uncertainty may be carrying out qualifying R&D activity. But if a project undertaken has been shelved or considered a failure. It is these types of projects that are considered better examples of R&D, because a company is providing validation that they were unable to achieve a solution.

WHAT COSTS QUALIFY FOR R&D TAX CREDITS?

So if a company meets the SME criteria (Small business R&D – less than 500 staff with a turnover under €100 million or a balance sheet total under €86 million).

The following expenditures qualify:

>Salaries
>Wages
>Class 1 National Insurance contributions
>Pension fund contributions
>Subcontractor or third-party costs
>Externally Provided Workers
>Software licenses
>Consumable items

If a company does not meet the criteria of an SME and is considered Large, the company can claim the R&D Expenditure Credit (RDEC).

The following expenditures qualify:

>Salaries
>Wages
>Class 1 National Insurance contributions
>Pension fund contributions
>Subcontract that are limited to the following:
>Charities
>Higher education institutes
>Scientific research organisations
>Health service body
>An individual or partnership of individuals
>Consumable items

THE BENEFITS OF R & D TAX CREDITS?

As a form of innovation funding, R&D tax credits can transform your business. At RDP Associates, we are passionate about helping innovative companies realise the full potential of R & D tax credits to succeed in growth. 

 HOW TO SUPPORT YOUR R & D TAX CREDIT CLAIM?

HMRC now requires narratives to support a company’s R&D expenditures. Here are the submission requirements by total number of R&D projects being claimed:

  • Are you claiming for 1 to 3 projects, HMRC requires a narrative meeting for the R&D tax credit criteria on each individual project
  • If you are claiming for 4 or more projects, HMRC requires narratives meeting the R &D tax credit criteria on at least 3 to a maximum of 10 projects which between them cover 50% or more of total qualifying R&D costs
  • Claiming for more than 10 R&D projects to cover 50% or more of your qualifying costs, HMRC requires a company to issue an email to RD.Incenti[email protected] to confirm the best manner for submission
  • Update: HMRC to issue standard claim submission form to all claimants effective 1 April 2021

Contact Us to Schedule a Free Assessment of Your Eligibility

So, if you want to know more about our R&D Tax Credit Guide or have a complimentary assessment of your eligibility, call us today. We offer a wide range of government funding programs as they pertain to your business operations.