What is an R&D Tax Credit?
An R&D tax credit is a payment either in cash, or a payment offset against your corporation tax. It’s a payment from the government aimed at rewarding companies that spend money developing new products, processes or services; or enhancing existing ones.
So what costs qualify for R&D?
Staffing costs are the big one. Your company can claim the salaries, wages, class 1 NIC and pension fund contributions for the staff directly associated with the project in hand. This can also cover supervisory and managerial time spent specifically directing employees in their activities.
You can also claim costs paid to external agencies for staff who are directly involved in the project in hand. In the SME scheme, your company can generally claim for 65% of the payments paid to these third parties.
Consumable items can also be claimed for, these are items directly employed and consumed in the qualifying R&D project. These can include materials, water, fuel and power.
Software directly used in the R&D project can also be offset against your claim.
Prototypes created can also be claimed. Where a prototype is created to test the R&D being undertaken, the design, construction and testing costs are all qualifying expenses.
The vital part of the entire process though, is understanding if a project you are undertaking qualifies and it’s here where the grey area lies for most businesses owners.
Architects for example can off-set project costs against R&D, brewers and distillers can also claim R&D. So can fashion brands, wholesalers and the agricultural sector.
To be able to claim R&D Tax Credits, here is a list of the qualifying criteria:
Be a UK company subject to Corporation Tax
Be a going concern
Not be in administration or liquidation
Be undertaking qualifying R&D activities
Spending money on R&D projects
Due to the complexity of the process, we recommend professional advice is taken when preparing your claim. The Recoup team of specialists are often able to identify more R&D activities and costs than an accountant, or any software that claims it can maximise your claim.
Our service will save you time and is completely end to end, which includes dealing with HMRC on your behalf.
To unlock a higher level of rebate, you do need a specialist to look at this for you. There are plenty of software applications out there at the moment and even accountants are saying they can complete this work.
Well, they may be able to, but they will not be able to maximise your claim and neither will the software. I generally go by the rule; you get what you pay for. There are always corners we can cut, but there is then generally a price to pay.
So to maximise your R&D claim, please contact us.