Claiming R&D Tax Credits
Is putting in an R&D tax claim difficult and time-consuming? Not if you understand your options and get the right support.
Discover why you should push forward with your R&D claim, how to claim, and other key facts about the claims process.
Or, if you’d prefer, join our webinar on Monday 17 May to learn how Research and Development Tax Credits can help your business continuously innovate, improve, and grow. Register your free ticket here.
Why process an R&D claim?
Whether you run a small or large business, you could be missing out on a substantial tax rebate if you don’t put in an R&D claim. Money you can use to:
- improve cash flow
- build on your products or services
- drive project efficiency
- unlock new opportunities
You don’t need a laboratory or an R&D division to be eligible.
If your business is actively overcoming technical challenges and developing innovative products or services, you may be able to claim up to 33% of qualifying expenditure (13% for large businesses).
How to do an R&D Tax Claim?
Claiming R&D tax credits is easy when you use a R&D tax consultant like Recoup.
Our process is simple. All you need to do is:
- Gather financial information, such as your full accounts for two years and the list of your payroll. All this information should be easily accessed through your accountant.
- Take a call with Recoup’s chartered tax advisor. They will draw out the technical challenges faced or the innovations implemented around your products, processes or services.
From there, we’ll manage the entire R&D claim process.
Our customers see funds in their accounts between six to eight weeks.
Claiming R&D tax credits on your own is possible, but be prepared to spend more time and energy managing the claims process.
Who else is claiming R&D tax credits?
Businesses from all industries are claiming R&D tax credits, including limited and PLC companies.
If you’re an SME, the formal prerequisites are:
- less than 500 staff
- a turnover of under €100 million; or
- gross assets of under €86 million.
Find out if you qualify for R&D tax relief using our free Eligibility Checker.
Claiming R&D Tax Credits FAQ
Can an LLP claim R&D tax credits?
Limited Liability Partnerships (LLP) can’t put in an R&D tax claim since they don’t pay corporation tax. An exception to this rule: a corporate partner is a part of your LLP.
Can I claim R&D tax credits if I don’t currently pay tax?
Don’t pay PAYE or national insurance contributions? As long as you otherwise qualify, you can put in an R&D tax claim.
How are R&D tax credits paid?
There are four key ways R&D tax credits can be paid:
A cash rebate
SMEs can claim a cash rebate of up to 33% qualifying expenditure. For larger businesses, it is 13% of your qualifying R&D expenditure under the Research and Development Expenditure Credit (RDEC) scheme.
A corporation tax saving
Put in an R&D claim in the same year that you file your corporation tax return and you could receive your tax credits as a corporation tax saving. You need to be profit-making to reduce your corporation tax bill in this way.
If you are a loss-making company and need to boost cash flow, you can elect to receive a cash payment from HMRC in exchange for the surrender of your R&D enhanced losses.
Making a loss after your R&D tax claim? You can choose to carry back the R&D loss to the previous year (granted it was profitable). Or you can carry it forward, offsetting it against future profits or surrendering it for group relief.
Speak to us to work out your business’ best option for claiming R&D tax credits. You may be able to use a combination of the options above.
Does software development qualify for R&D credit?
Software development companies should be able to put in an R&D tax claim if they:
- build software in-house
- provide Software as a Service (SaaS)
- provide enterprise resource planning (ERP) systems
- have teams of software developers supporting other businesses
The qualifying activities HMRC look for are:
Building software products or systems that harness new technologies and innovations to improve system speed and performance
- Improving the capabilities of an existing system or product (not just configuring software for your business but adapting bespoke systems for a specific purpose)
- Overcoming scientific or technological uncertainties that are yet to be tackled by an expert
Generally speaking, HMRC wants to see you try to advance in a field of knowledge in the information, communication or computer science sector, not just advance your business.
What qualifies for the R&D tax credit?
How you qualify for an R&D tax claim varies depending on the industry you’re in. For example, if you’re in the construction industry, qualifying activities include:
- Groundwork and foundation issues (e.g. flooding and asbestos issues)
- Environmental issues
- Parking and transport issues
- Enhancing energy efficiency of buildings (e.g. you’re building with carbon neutral in mind)
To find out if you qualify, call us on 0800 3277514 or use our free Eligibility Checker.