R&D Tax Credits are a Government incentive designed to reward companies that invest in innovation.
An valuable source of cash each year that can be reinvested in the business.
how do R&D tax credits work?
Money spent on developing new products, processes or services or enhancing existing ones may qualify.
Successful claims receive either a Corporation Tax reduction or a cash payment.
is my business eligible?
You must be a Limited company in the UK subject to Corporation Tax and must have spent money on qualifying R&D activities.
what sectors can claim?
Industry, Construction, Energy, Food & Beverage, Life Sciences, Healthcare, Medical Technology, Agriculture and many others!
how much can i claim?
SME scheme
You are eligible for the R&D Tax Credits SME scheme if you have less than 500 employees in your company and/or group and less than £100m turnover.
If you are in profit, 130% uplift is applied to R&D costs, leading to a tax reduction of £24.70 for each £100 spent on R&D
If loss making, you could receive a cash payment of £33 for each £100 in R&D expenditure
Claims can be back dated two years resulting in a repayment of Corporation Tax already paid
RDEC scheme
You are eligible for the R&D Tax Credits RDEC scheme (formally Large Company Scheme) if you have over 500 employees in your company or group or more than £100m turnover.
No minimum R&D spend
No upper limit on claims
From April 2020, above the line credit, is mandatory with a benefit of £10.50 per £100 on R&D
Can still access the 30% uplift scheme for previous tax years
definition of R&D
seeking to achieve an advance in science or technology
“R&D for tax purposes takes place when a project seeks to achieve an advance in Science or Technology” (BEIS Guidelines)
An advance in the overall knowledge or capability in the field of Science or Technology:
A new or appreciably improved process, material, device, product or service
Extend overall knowledge or capability
through the resolution of scientific or technological uncertainty
“The activities which directly contribute to achieving this advance through the resolution of scientific or scientific uncertainty are R&D” (BEIS guidelines)
“….knowledge of whether something is scientifically possible or technologically feasible , or how to achieve it in practice, is not readily available or deducible by a competent professional.”
“Turning something……scientifically feasible, into a cost effective, reliable and reproducible.”
what is an advance in science or technology?
A project which seeks to achieve an advance in Science or Technology must have:
Tangible consequences (new or more efficient product, service or increase in technological capability
Intangible outcomes (new knowledge or cost improvements)
An advance can be:
A significantly new process, material, device, product or service
An appreciable improvement to an existing process, material, product or service
An advance is measured:
Against knowledge available in the public domain or the knowledge base to be expected of a competent professional
Important to note that success is not a requirement
what is scientific or technological uncertainty?
Scientific or Technological uncertainty exists:
Where knowledge of whether something is scientifically or technologically feasible, or how to achieve it in practice.
Is not readily available or deducible by a competent professional.
System uncertainty can result:
From the complexity of the system, rather than uncertainty about how individual components behave.
When trying to turn something already scientifically feasible into a cost effective process, device, product, etc.
