If your SME qualifies for Research and Development Tax Credits, you could save an average of £61,514. Yet thousands of companies don’t claim R&D tax reliefs because they don’t realise that they qualify. Don’t let your business be one of them – ask THP to find out what you can claim, and how.

R&D tax credits - at a glance

Research and development tax reliefs are open to businesses in any sector.

If you have one or more projects that could lead ‘to an advance in overall knowledge or capability in a field of science or technology’, you are likely to qualify for special tax breaks.

Projects that qualify for R&D tax breaks

If you research or develop a new process, product or service (or improve an existing one), you could meet the criteria for R&D reliefs.

This can cover a whole range of activities. Even projects that have failed can qualify!

These are just some examples of activities that may attract R&D relief:

  • Software development
  • Using or combining current technology in unique ways
  • Manufacturing or designing new products
  • Developing more efficient or cost-effective internal processes
  • Design projects that improve technology

The devil is in the detail, but don’t worry. THP’s accountants can help you find out whether your project qualifies – and advise whether other activities could attract tax breaks.

Types of R&D relief you can claim

This is where things get complicated. There are several types of relief available to SMEs and you need to claim the one that gets the best financial result for your business.

The first step is to apply for an 130% uplift to your R&D expenditure. If approved by HMRC, it works like this:

  • You spend £10,000 on qualifying R&D activities. This is multiplied by 130% - meaning your investment is treated as £23,000 for tax purposes.

What happens next depends on a number of factors, including whether your business is making a profit. In a nutshell, there are three types of relief available:

  1. R&D Tax Relief
    If your company is profitable, you can claim relief against Corporation Tax of up to 24.7% of your qualifying expenditure (enhanced by 130% as above).
  2. R&D Tax Credits
    In some circumstances, you can get a cash payment from HMRC up to the value of 33.35% of your qualifying expenditure.
  3. Offset losses
    Sometimes your best option is to use the qualifying expenditure to enhance your losses and offset them against future Corporation Tax bills.

We strongly recommend you get advice before applying for any of these reliefs. Choose the wrong one and you could lose out!

R&D Tax Credits and Innovation Grants

If you receive – or want to apply for – a grant from Innovate UK, then things get even more complicated!

There’s a common belief that you can’t benefit from both Innovation Grants and R&D Tax Credits. This isn’t actually true, but it does take careful planning.

THP can help you understand the complex way in which R&D grants from Innovate UK and other sources interact with R&D tax reliefs – and to plan accordingly. Give us a call to find out more.

Let THP do the heavy lifting!

THP has helped many businesses claim thousands of pounds in R&D reliefs. We will work with you to provide specialist advice and prepare strong claims that cover all of your qualifying R&D activity and costs.

We’ll deal with HMRC on your behalf and make sure your claims are processed as speedily as possible, securing you valuable extra money to reinvest in your business.

Get started – contact us today

To claim R&D reliefs under the SME scheme, you must have fewer that 500 employees (or the full-time equivalent) and have either:

  • An annual balance sheet total under €86m; OR
  • A turnover of under €100m.

Any sector. The qualifying criteria apply to your R&D projects, not the industry you are in. Companies from these industries and others have claimed R&D reliefs.

  • Accommodation & Food
  • Admin & Support Services
  • Agriculture, Forestry, Fishing
  • Arts & Entertainment
  • Construction
  • Education
  • Financial & Insurance
  • Health & Social Work
  • ICT
  • Manufacturing
  • Retail
  • Transport & Storage
  • Water, Sewerage and Waste
  • And many others!

It’s best to get specialist advice on what counts as R&D, but if your company meets any of the following criteria you could well qualify for R&D tax relief:

  • You are a company that makes things.
  • You are a fast-growing company
  • You are market leading
  • You are involved in any form of innovation
  • You work on projects.

We can work this out for you but, for example, you can claim R&D Tax Credits on revenue expenditure such as equipment and materials, software, prototypes, staffing costs, contributions to independent research, externally provided workers and subcontractors involved in your project(s).
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