About R&D tax credits

HMRC's Research &
Development Tax Relief

Research & Development Tax Credits were introduced by the government in 2000 to encourage scientific and technological innovation across the UK with the aim of building a modern knowledge-based economy. As an approach targeted at companies the benefit is derived as a corporation tax relief so only companies (or company member of a partnership) can claim.

What is R&D and Do I Qualify?

There are statutory definitions that must be met in order to qualify for R&D tax relief. In particular, the work undertaken must be within the field of science or technology where an advancement is sought. Some form of uncertainty should also exist and the project should seek to overcome this.

The most commonly understood type of R&D is laboratory based science work but that is only one of a broad range of business activities that can qualify for R&D Tax Credits. Any scientific or technological project undertaken should be considered as many will meet the qualifying criteria.

Research and Development Tax Credits Explained

Qualifying R&D Activity

HMRC classifies R&D as a project that seeks to 'advance science or technology' and tries to overcome a 'level of uncertainty'. This must be within the overall field of science or technology.

Our 5-step process includes initial discussions which enable us to determine whether you meet the qualifying criteria for making a claim.

As a taster, some of the types of qualifying project activities include:

creating new products, processes, software, services or devices.

improving or changing existing products, software, services or devices.

unsuccessful projects can also qualify.

Qualifying R&D Costs

The expenses your business incurs in trying to overcome these scientific or technical challenges form the basis of an R&D Tax Credit claim and the following cost categories may be included:

staff: expenditure on salaries, wages, NICs & employer pension contributions.

subcontractors: expenditure on agency staff, freelancers and subcontracted R&D activities.

raw materials: expenditure on consumables and raw materials.

utilities: expenditure on consumables

software: expenditure on software designed for or used in the R&D projects.

Benefiting Your Business

R&D Tax Credits provide a reduction in tax payable on company profits or payment of a surrenderable loss.