Research and development tax credits give companies the opportunity to claim back some of the costs involved with carrying out scientific or technological research and development. It has been stated by organisations such as the APDIG that as few as 6% of business that could claim for R&D actually do so, meaning that many are missing out on this valuable remuneration.
What you can claim for
Businesses of any size can claim for R&D tax credits, albeit under slightly different schemes. The common factor is that claims can only be made for projects that aim for an overall advance in scientific or technological knowledge – not just an advance in a business’ own capability. The project must also relate to either the existing trade in which a company is involved or one that it intends to develop as a result of the research.
If your business is engaged in overcoming scientific or technological uncertainties (for which there is no ready solution) as part of its work, and you are not receiving R&D relief, you could be eligible to make a claim.
If you aren’t claiming for research and development tax credits because the work you are performing is being undertaken overseas, you may want to revisit that decision. R&D tax relief is a reduction in corporation tax, so if your business is based in the UK and global profits are subject to corporation tax, you may be able to claim for R&D work being carried out overseas.
This is subject, of course, to certain conditions, and claiming for relief on overseas endeavours can be complex. It’s not uncommon to find companies under- or over-claiming, which is why, in such cases, seeking assistance from an experience tax advice firm is recommended.
SME and RDEC schemes
Some businesses don’t claim for R&D tax credits because they are unsure which scheme they fall under. Simply put, the scheme under which your organisation falls depends on its size and turnover. The SME scheme applies to companies with fewer than 500 employees, and either an annual turnover of under €100 millionor a balance sheet of less than €86 million.
If your business exceeds these limits, however, it automatically becomes part of the RDEC scheme, and must claim as such. As of April 2016, the RDEC scheme replaced the Large Company scheme.
Loss making businesses
You may think your business is ineligible to claim relief because it is loss making, but this is a fallacy.If your small or medium sized business, for example, is making a loss, you may be able to surrender the loss relating to R&D activities for a monetary value of £33.35 for every £100. Such recompense could prove to be the difference between another year of business and liquidation, so ensure you investigate the possibilities before dismissing your company’s eligibility.
If you’re still unsure about your organisation’s eligibility for R&D tax credits, or find the claims process complex and confusing, it’s advisable to seek assistance from an experienced tax advisor. They will work with you to put an accurate claim together and ensure you receive relief for any qualifying activity that your company carries out.