R&D Tax Relief Frequently Asked Questions | Menzies LLP

What is the R&D tax credit?

A corporate tax break introduced in 2000 to incentivize innovative UK companies to invest in R&D and create breakthroughs in science and technology.

What is the definition of R&D?

HMRC legislation and guidance are not intentionally overly prescriptive so as not to discourage genuine claims. Basically R&D is an advance in science or technology, this can be in relation to a new product / process or improvements to an existing product / process.

What is the relief available?

This depends on the R&D scheme you claim:

SME scheme:

Tax company – tax savings of 24.70%. For example, £ 24,700 of savings for every £ 100,000 of qualified expenses.

Claims company: refund of the tax credit of up to 33.35%. For example, up to £ 33,350 of tax credit reimbursement for every £ 100,000 of qualified expenses.

Grand scheme:

Savings or tax amortization of 13% (net 10.53%). For example, £ 10,530 of tax savings or refundable credit for every £ 100,000 of qualified expenses.

How do I know if I am claiming under the SME or Large Scheme?

To claim under the SME scheme, you must meet the following criteria when taking into account all related and associated companies:

  • Less than 500 employees and
  • Less than 100 million euros of turnover or
  • Gross fixed assets of less than 86 million euros

If R&D work has been outsourced to you or outsourced, you may not be able to claim under SME scheme, but you could still make qualified large scheme claim.

What is qualified R&D spending?

  • Personnel costs, including gross salary, employers’ NIC, and employer pension contributions.
  • Subcontractors / Outsourced Workers
  • Consumables including water, fuel and energy
  • software

Does an R&D project have to be successful and complete in order to make a claim?

No, as long as you are looking for advances in science or technology and you are doing R&D to do so, you can claim from the point where the project begins. The project does not have to be successful in order to make a claim and you can claim for failed projects.

Is this relief only for science and technology type companies?

This is not just a relief for the “men in white coats” and although the pharmaceutical and software development companies will make claims, we have made claims in all sectors, including manufacturing, property and construction, transportation and logistics, hospitality and leisure.

How long do I have to make a claim?

You have 2 years after the end of the accounting period to make an R&D claim, after which the period for making claims is closed.

Do I have to make a profit and pay corporation tax to file a claim?

No, even if your business is at a loss, you can still file a claim and receive a tax credit refund, even if you have never paid corporate tax.

If I have received other grants, will this affect the R&D claim?

This will potentially depend on the nature of the subsidy and whether it is classified as notified state aid. Even if you have received a grant for R&D projects, you can still make a claim under the grand scheme.

Can sole traders and associations claim R&D tax relief?

No, only companies subject to corporation tax can make an R&D claim.

How are R&D claims made?

Claims are submitted through the corporate tax return, which will normally be accompanied by a complementary R&D report that details the nature of the R&D qualification carried out and quantifies the claim.

How long does it take for HMRC to process R&D claims and issue refunds due?

HMRC typically seeks to process claims within 28 business days of receipt.

What are your fees for making R&D tax relief claims?

As with most vendors, we generally work on a “no win no pay” contingent basis where we take a percentage of the R&D tax credit / savings, but only when the claim is successful.

For more information on how we can help you in R&D, please contact Anthony Lalsing below:

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