If you would like to know more about our tax advice or tax investigation services, please get in touch by filling out our enquiry form. One of our experts will endeavour to contact you back in the shortest time scale possible. If your enquiry is urgent, you could always contact us using our telephone numbers located on this page.
Tax credits are available as a reduction to your corporation tax
CODE FO PRACRTIVCE 9
The UK Government’s Industrial Strategy has committed to increase investment in research and development (R&D) in the UK to 2.4% of GDP by 2027, with a longer-term goal of 3%¹. Delivering this will need significant increases in investment from both public and private sources. The Government has committed to increase public investment with an additional £7bn over a five year period². This direct investment alongside various other measures such as the R&D Tax credits scheme can be used to encourage and stimulate further investment by businesses. This document outlines how current tax relief for R&D is offered under R&D tax credits
What are R&D tax reliefs? R&D tax reliefs are designed to encourage greater R&D spending, leading in turn to greater investment in innovation. They work by either reducing a company’s liability to corporation tax or by making a payment to the company³. The rate of relief depends on whether a company is an SME or a large company. R&D has a specific definition for tax purposes. To qualify, projects must advance knowledge or capability in science and technology, and try to resolve uncertainties that a competent professional could not easily solve. It can include the creation of new processes, products or services that make improvements to existing ones, or duplicate them in a new way
HMRC R&D tax credits statistics 2018
The latest HMRC R&D tax credit statistics re-assert the value of these vital tax incentives to innovative companies. The statistics also begin to demonstrate some new trends – as well as continuing some others from previous years which will be encouraging to SMEs and large companies alike. There is a growing awareness and uptake of the R&D tax credit incentives, and the average claim value continues to rise.
- The number of claims submitted to HMRC in the last year has more than doubled.
- For SMEs, the average claim value for 2016-17 is £53,876.
- The number of SMEs making a claim has more than doubled since 2013-14.
- 75% of SMEs are making a claim worth less than £50,000.
- The average RDEC claim for 2016-17 is worth £272,881.
- A massive 5,900 RDEC claims were submitted in 2016-17, representing a 185% increase since its introduction.
- This is further shown by the fact there are now more SMEs claiming via RDEC than there are large companies.
It is important to note that the statistics for 2016-17 are not yet complete. This is because returns for this period can still be submitted past the publication date. As a result we expect this data to be revised next year, and so the following figures should be viewed as provisional.
Research and Development Tax Credits are available either as a cash incentive or a deduction in Corporation Tax.
Allowable Claim Under R&D
- Software Development
- Failed and Successful Projects
- Development of Innovative Recipes
- Development of Innovative Formulas
- Development of New Materials
- Improved Processes
- Development of New and Improved Products
- Development of Environmental Products
- And many more
- Staff costs including salaries
- employers NIC
- reimbursed expenses
- subcontractors and freelancers
- materials and consumables
- including light
- heat and power and some types of software
- Also payment to the subjects of clinical trials
- Creative industries
- Engineering & Technology
- Enviromental & Forestry
- Financial Services
- Food,Drink, Agritech
- Life & chemical Science
- Social Enterprise and 3rd sector
- Tourism & Leisure
R & D Can claim back 2 full tax years accounts
Things that are R&D:
- Developing a new product/process/service to market
- Faced uncertainties while doing so, couldn’t just buy of the shelf. There were challenges, risks, failures and going back to the drawing board moments. Doesn’t have to work to claim.
- Identified a problem in your market and worked on a solution.
- Taken something that is industry standard and made it better/stronger/faster/eco-friendly and more.
Who can Claim?
- A taxpayer selling or not selling their commercial property should consider a claim. You may be entitled to tax relief.
- Companies, individuals, partnerships and trusts which: Own commercial property (freehold or long leasehold) which cost more than £300k.
- Commercial Property owners who have substantial expenditure on the construction, refurbishment or extensions to commercial property.
- SME’s with fewer than 500 staff and either not more than €100m turnover or €86m gross assets.
- If they are Loss making they can claim up to 33% and if Profit making up to 26%.
- Average claim is around £53K for SME’s
- Large Co’s are companies with more than 500 employees and either more than €100m turnover or €86m gross assets. If the company is part of a group these figures apply to the whole group and includes worldwide headcount.
- Large Co’s can claim up to 10%
- Average claim is £272K for Large Co’s
We are proactive and efficient with your time.
- The expert team we assemble for you will arrange a kick-off call to introduce themselves and start to identify the information needed to create your claim.
- We will work with whatever systems and records you already have. We won’t ever ask you to fill in a spreadsheet or write a project description. We are proactive and do all the heavy-lifting so that you don’t have to.
- If you’d like us to, we’re happy to work with your accountant directly to obtain your accounts and payroll information.
We identify your qualifying activities and costs and maximise your claim by uncovering the full extent of your qualifying activities and costs.
- Matching the right Churchill Tax specialist to the right people in your business is the key to making our process easier and more efficient.
- Our team of sector specialists will work directly with the science or technology experts in your business to determine the full extent of your qualifying R&D.
- A tax specialist will work directly with your finance team to identify all of your relevant qualifying costs.
- No stone is left unturned. We will look beyond the most obvious R&D projects and expenditure to fully maximise your claim.
We create a methodology bespoke to you with quality assurance built-in, giving you peace of mind that your claim is robust and protected from risk.
- We understand that every business is different. A quality assurance specialist will create a bespoke methodology unique to your business, your activities and your records.
- We will create a report for you to review. It will include a technical narrative, a summary of the costs you have incurred and how we have arrived at your total benefit figure.
- Before this is sent to you for approval, it will undergo a detailed review by our quality assurance team. This includes sign-off by a former HMRC R&D unit inspector.
We deal with HMRC on your behalf and will take care of everything to ensure minimal hold-ups and queries.
- We will submit your report and amend your Corporation Tax return (CT600), incorporating your R&D tax credit calculation – unless you prefer us to help your accountant to do so.
- We will follow up with HMRC to check on your claim’s progress.
- In the unlikely event that HMRC opens an enquiry relating to your R&D tax credit claim, we will resolve this for you at no extra cost.
Receiving your R&D tax credit, you are rewarded for your investment in innovation.
- It typically takes HMRC between four and six weeks to process a claim, although RDEC can sometimes take a little longer. Your R&D tax credit cash benefit is paid directly into your bank account.
- If your business is profitable, your overall Corporation Tax bill will be reduced, or if you have already paid your bill for the period, you will receive a repayment.
- If your business made a loss for the period, you will receive a R&D tax credit cash refund.