What Is R&D Tax?Does My Innovation Qualify?Calculator

What are R&D Tax Credits?

Research and Development Credits are a Government incentive scheme designed to encourage innovation by rewarding UK companies with Tax Relief on their Corporation Tax Bill if they carry out innovative activities.

If your company has created new or enhanced existing products, undertaken any work to improve processes or made improvements in services in order to reduce costs, win more business or improve service levels, you could qualify for R&D Tax Credits.

SME Scheme VS RDEC

Depending on the circumstances of your business and your R&D project there are two schemes that you can apply for.

SME Scheme
Scheme Details
The SME R&D Tax Credit scheme is open to any UK limited company that has incurred costs for a R&D project that they initiated and conducted themselves in the last 2 years.

The scheme allows you to claim an additional 130% of the qualifying costs spent on the project against your corporation tax bill.
Qualification Requirements
For a company to be regarded as an SME and qualify for the scheme it must satisfy all criteria:
Employing fewer than 500 people
Annual turnover of turnover less than £100m
Balance sheet total not exceeding £86m
No Grants, Subsidiers or Subcontracting to LMEs
Profit Making SME
24.7%
Effective Tax Rate
For every £1 spent on R&D activities Profit making businesses can claim back up to 24.7p in tax relief.
Loss Making SME
33.35%
Effective Tax Rate
Loss making Companies can choose to either carry forward/back an enhanced loss (130%) or claim a cash credit of up to 33.35% of the money spent on R&D activities.
RDEC
Scheme Details
The Research and Development Expenditure Credit scheme is open to all large UK limited companies who are too large to qualify as an SME.

RDEC can also be claimed by SME businesses who have been subcontracted to do R&D work by a LME or those who have received a grant or subsidy for part of their R&D project.

The scheme offers a flat rate tax credit of 13% of the qualifying R&D expenditure.
Qualification Requirements
For a company to be regarded as an LME it must be larger than any of the SME criteria.
UK LME Business
SME Subcontractor to LME
SME using Grants or Subsidies
All Claims
10.5%
Effective Tax Rate
For every £1 spent on R&D activities businesses can claim back up to 11p in R&D tax relief.

How Can R&D Tax Credits Help Your Business?

If you have spent money on qualifying innovative activities in the past two years you can reduce your company’s corporation tax bill an extra 130% of the amount you spent on the innovation.

Our calculator can give you a quick estimation of your potential R&D tax relief saving. Our worked through examples explain in more detail how this will impact your finances.

SME - Profit Making Business

For every £1 spent on R&D activities Profit making Companies can claim back up to 24.7p in R&D tax relief.

example - Profit Making

SME - Loss Making Business

Loss making businesses can choose to either carry forward or carry back an enhanced loss (130%) or claim a cash credit of up to 33.35% of the money spent on R&D activities.

example - Loss Making

RDEC Claims

For every £1 spent on R&D activities businesses can claim back up to 11p in R&D tax credits.

example - RDEC
Calculate Your R&D Tax Saving:

What Costs Can Be Included In Your
R&D Claim?

All costs spent on the Research & Development activity will qualify for a claim in the relevant tax year they were incurred in.

Staff Time
You can claim for the cost to use your staff's time on the project including their Salary, Employer’s NI & Pension contributions.
Subcontractors
65% of all subcontractor and agency staff costs are allowed as long as they are an unconnected to your business.
Materials
Any materials consumed during the R&D process (you can also include a proportion of your Light & Heat costs and your Water Rates.
Software
Cost of the software used specifically for the R&D process.
Other expenditure such as travel and subsistence, car hire, motor costs and telephone costs are usually not allowable for R&D tax relief purposes.

FAQS

Frequently Asked Questions

Does my business qualify for the SME Scheme?

SMEs can benefit from an enhanced rate of R&D tax credits compared to larger businesses. For a company to be regarded as an SME and qualify for this scheme it must meet the following criteria:

- Must be a UK Limited Company
- Must employ fewer than 500 people
- Have either an annual turnover of no more than £100 million or a balance sheet total not exceeding £86 million.

How far back can you make a claim?

There is a 2 year time limit to how far back you can make a claim on incurred R&D expenditure. The date that the costs were paid must have occurred within 2 years starting from your current company year end date.

For Example -  If your company tax year end date is the 30th June 2018, you can claim any qualifying R&D costs incurred going back to the 30th June 2016.

What happens if the project spanned over 2 years?

If your Research and Development projects spans multiple years we will help you to make a separate claim for each year including the respective qualifying expenditure. The total tax saving will be the same result as if the project fell into one tax year.

What happens if I sold the product we developed?

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Does it matter if the project failed?

Companies are able to make a claim for their R&D projects whether they were successful or not. The R&D Tax Relief does not discriminate between the two as it aims to encourage businesses to innovate. The scheme therefore helps businesses to mitigate some of the financial risk involved in research and development.

Example Successful R&D Claims

Research and Development can take place in any industry or business at any scale.
See below some of our previous successful R&D claims:

Conveyor Manufacturer

Conveyor company claimed for a portable conveyor system which allows for ease of access to basements with limited access.

Flooring Company

Flooring company claimed for a cold joining system that allowed for endless flooring complete with mobile delivery system.

Waste Processor

Waste Processor successfully claimed for work carried out on decontaminating waste drilling cuttings from deep sea drilling.

Online Gambling Software Developer

Online gambling software developer successfully claimed for software to monitor gaming over three platforms.

Food Packing Company

Food packing company claimed over last three years for the innovations they made in the design of it’s packaging.

Building Company

Building company claimed for improving their current production process for pre-fabricated building construction in their factory.

Horticultural Company

Horticultural company claimed for the design of a soil sifting and drying process, which helps in the cleaning of contaminated soils.

Brick Manufacturer

They successfully claimed for improvements to their PFA brick production plant, which increased production by 35% and reduced wastage by 95%.

Do you want to take a Free Evaluation to find out whether your project qualifies?
We offer Free, No Obligation Evaluations to determine whether your project meets the Research & Development Criteria. Contact us today to find out more.
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Get a Free R&D Tax Relief Evaluation

To find out if your project or innovation qualifies under the R&D SME scheme and how it can help your business, get in touch for a Free, No Obligation Evaluation. Start claiming R&D Tax Credits today.

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What are Research & Development Tax Credits?

Research and Development Tax Credits are a Government incentive scheme designed to encourage innovation by rewarding UK companies with reductions in corporation if they carry out Research and Development activities. The UK has one of the most generous schemes with an estimated £6 billion budget per year available to be reclaimed by SMEs.

What is the scheme?

R&D tax credits enable companies that incur costs in developing new products, processes or services to receive a cash payment or tax deduction. The average annual claim for an SME claimant, across the UK, is over £46,000. R&D tax credits can therefore be an incredibly valuable source of funding for many businesses, with up to 33.35% of a company’s R&D spend being available as a cash repayment from HM Revenue & Customs (HMRC).The R&D tax credit scheme is a HMRC incentive designed to encourage innovation and increased spending on R&D activities by companies operating in the UK. 

The scheme effectively allows you to claim back the tax paid on any associated costs with a project you have undertaken that qualifies as Research or Development whether this be through reducing your Corporation tax bill or by giving you a Tax Credit back.

The Government has expressed its desire to make the UK the most attractive place to start and invest in innovative companies and as a result the incentives for companies to innovate have continued to improve.R&D tax credits were first introduced in 2000, although only available to SMEs initially, so this is not a new form of tax relief. However, in recent years the rates have increased significantly to further incentivise companies to claim (see below for details).A parallel regime followed for Large Companies in 2002 and the Research & Development Enhanced Credit (RDEC) scheme for Large Companies was introduced from 1 April 2013.

What costs can you claim relief on?

Under the SME scheme you can claim for various costs, some of which you may not think of.

  • Staff costs (Salary, Employer’s NI & Pension contributions)
  • Any materials consumed during the R&D process (you can also include a proportion of your Light & Heat costs and your Water Rates)
  • Subcontractor costs (65% is allowed if they are an unconnected person)
  • Agency provided workers (65% is allowed if the agency is not a connected entity)
  • Cost of the software used for the R&D process

Other expenditure such as travel & subsistence, car hire & motor costs and telephone costs are usually not allowable for R&D tax relief purposes.

What are R&D Tax Credits?

Research and Development Credits are a Government incentive scheme designed to encourage innovation by rewarding UK companies with reductions in their Corporation Tax Bill if they carry out innovative activities. The UK has one of the most generous schemes with an estimated £6 billion per annum available to be reclaimed by SMEs.

Does my business qualify for the SME scheme?

SMEs can benefit from an enhanced rate of R&D tax credits compared to larger businesses. For a company to be regarded as an SME and qualify for this scheme it must meet the following criteria:

How far back can you claim?

There is a 2 year time limit to how far back you can make a claim on incurred R&D expenditure. The date that the costs were paid must have occurred within 2 years starting from your current company year end date.

For Example -  If your company tax year end date is the 30th June 2018, you can claim any qualifying R&D costs incurred going back to the 30th June 2016.

Staff Time
Salary, Employer’s NI & Pension contributions
Subcontractors
65% is allowed if they are an unconnected person
Materials
Any materials consumed during the R&D process (you can also include a proportion of your Light & Heat costs and your Water Rates
Software
Cost of the software used for the R&D process

Other expenditure such as travel & subsistence, car hire & motor costs and telephone costs are usually not allowable for R&D tax relief purposes.

Other expenditure such as travel & subsistence, car hire & motor costs and telephone costs are usually not allowable for R&D tax relief purposes.