R&D Tax Credits (SME)
Cost Care Tax has over 20 years’ experience in managing research and development (R&D) claims for small-medium sized enterprises. Since the scheme’s launch in 2000, we have claimed back £85m+ in R&D tax relief for thousands of UK businesses and helped them reinvest in their futures.
Our tax specialists are available for a free exploratory call to discuss your R&D tax credit eligibility.
What is R&D tax relief?
Research & Development (R&D) tax relief is a government incentive established in 2000 to offer financial support to companies, with the aim of improving long term economic growth for the UK. It allows companies that carry out qualifying R&D related to their trade, to claim an extra corporation tax deduction for qualifying expenditure and also gives the option of receiving a payable tax credit where losses are created. However, many businesses do not claim the R&D tax relief that they are eligible for, or are not claiming their full entitlement, which in our experience stems from a number of misconceptions, the most common of which being:
“We do not do any research and development”
The headline requirement of “an advance in science and technology”, can and does, deter thousands of companies from making a claim, but HMRC, in their own publications, clearly state that this is ‘not just for “white coat” scientific research’ and that “brown coat” development also qualifies, i.e. construction, engineering, food technology, textiles, financial services etc.
Global activity is experiencing an ever increasing emphasis on innovation and the UK Government’s business strategy is to encourage the expansion of research and development work undertaken by UK companies, to allow them to continue to compete effectively in world markets. In recognition of the need to offer financial support to businesses to enable them to invest in this innovation, the UK Government introduced the Research and Development tax relief scheme.
Despite significant promotion of the scheme since its inception, and numerous subsequent changes to make it more financially attractive – for example the SME rate of relief was increased from 150% of qualifying expenditure in 2000, to its current rate of 230% – research suggests that as many as 97% of eligible businesses fail to claim the R&D tax relief they are entitled to and miss out on vital funds that could be reinvested back into their businesses. To this end, the UK Government has committed to achieving an increase in R&D expenditure to 2.4% of GDP by 2027, this being from a current level of 1.7% (approx.). We believe that the main reasons for both the current low number and value of claims, are firstly a lack of understanding of what R&D for tax purposes means and secondly, how to identify ALL qualifying expenditure.
Cost Care Tax are specialists, trusted by hundreds of accountants across the UK, who work with both first time claimants who have never considered R&D tax relief before, in addition to clients familiar with the process who are looking to ensure that they are maximising their entitlement. Cost Care Tax has made thousands of successful claims over the years, reclaiming £millions that businesses can reinvest in future R&D, thus promoting growth, both for their own business and the UK economy as a whole.
The average monetary benefit to our clients is currently over £78,160 per client.
Please get in touch to find out how much you could claim.
The Benefits of Claiming R&D Tax Relief
Companies that qualify for relief can benefit from a reduction in corporation tax (CT) liability and loss making businesses can receive a payable tax credit, both of which impact positively on the business.
Example monetary benefits:
Project expenditure £100,000 = £130,000 enhancement = reduction in CT liability of £24,700 assuming 19% CT rate.
For a loss making company, a project spend of £100,000 can generate a cash payment of £33,350, assuming a loss surrender rate of 14.5%.
- Reinvest in your business, people and processes – hire that additional developer or purchase that piece of machinery.
- Fund future R&D projects to further expand knowledge and capability in your sector.
- Improve your credit rating, reducing the cost of supply
- Companies with R&D expenditure on the P&L account can attract a higher sale value
The Claims Process
We appreciate that our clients invest the majority of their time and energy into running their businesses, with little or no spare time to compile a research and development claim. That’s why our streamlined claims process is designed to save you time, stress, and inconvenience. You need only invest a short amount of time bringing us up to speed with your R&D projects and we’ll take care of the rest.
- One of our knowledgeable, experienced business development managers will have an initial conversation with you to confirm eligibility potential. This avoids wasting your valuable time if we do not feel there would be any possibility of a successful claim.
- If we identify potentially qualifying areas, you will be asked to sign an Agreement, and a dedicated Key Account Manager will then be assigned to assist you every step of the way.
- A member of our R&D technical team will assess your R&D activity – we have numerous ways to gather this information, including via telephone, by email or through a site visit. The best way would be determined on a case-by-case basis.
- Following qualification of R&D activity, a request will be made for your P&L accounts, tax computations, and payroll information.
- A technical report will be written. Following your approval of the report content, financial schedules will be produced and delivered to your accountant.
- You will receive a tax repayment or tax liability reduction within approximately 6 weeks.
- Cost Care Tax will request payment for the service using our competitive rates; fees are completely contingent on a successful outcome.
Businesses in any industry can apply for R&D tax relief if HMRC criteria is satisfied and the costs are eligible. We have claimed back £millions for clients in the following industries:
Software Developers, IT Specialists, Hardware Developers.
Civil, Aerospace, Chemical, Electrical and Design Engineering.
Residential and Non-Residential.
Component manufacture, Design and Maintenance.
Textiles, Steel, Chemical and Electronics.
Food & Drink
Ingredient Manufacture, Out-of-Home Food Service.
Physical, Biological, and Mathematics
Plane and Drone Manufacturer Supply Chains
The work that qualifies as research and development (R&D) can be a new or improved process, product or service that’s part of a specific project to make a scientific or technological advancement relating to your company’s trade. The business seeking R&D tax relief must explain how its project:
- Had to overcome uncertainty – you sought to develop something that wasn’t known to be scientifically or technologically feasible, or that was subject to trade secrecy.
- Tried to overcome this uncertainty – through research, testing and analysis.
- Sought a technological advance – one that could benefit the whole sector, not just your own business.
- Couldn’t be easily worked out by a professional in the field.
R&D tax relief is not just for scientists dressed in white laboratory coats. Many of our clients were unaware that they were involved in qualifying activity. Whether you’re a press tool manufacturer, a steel fabricator, a software developer or work in the food industry, you may be surprised at how much you could claim back for your hard work.
Claiming R&D tax relief may sound complicated, but our proven claims procedure takes the stress out of the process, allowing you to concentrate on running your business.
Are you a UK incorporated company? Have you delivered a project that was beset by difficulty? Have you spent time and/or money developing it? If you answer “yes” then you will likely qualify for R&D tax relief. Profit-making and loss-making businesses have equal access to the R&D tax relief scheme, regardless of industry sector.
HMRC operates two schemes: one for SMEs and another for large companies.
Small and medium-sized enterprise (SME) R&D tax relief
You can claim SME R&D tax relief if your business has:
- Fewer than 500 staff
- A turnover below €100m or a balance sheet below €86m.
SME R&D relief allows companies to deduct an additional 130% of qualifying costs from taxable profit, in addition to the normal 100% reduction through the profit and loss, bringing the total to 230%.
You can include any or all of the below costs as part of your claim:
- Staff costs (Incl. gross pay, employer’s NI, reimbursed employee expenses and employer’s pension contributions).
- Agency workers (externally provided workers).
- Subcontractors/freelancers (limited to 65% of cost in most cases).
- Software license costs.
- Consumable items (heat, light and power, and materials or equipment used or transformed by the R&D process).
- Payments to the subjects of clinical trials.
Our friendly calculations team can advise which costs can and can’t be included in your R&D tax claim, and they have a proven track record of maximising tax relief for each client.
A more comprehensive overview of qualifying costs can be found here.
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