R&D tax credits

Imagine if you had an extra £63,000 to invest in growing your business.

£63,000 is the average claim value that R&D tax credits can provide to innovating UK businesses. This can be used to reduce your tax bill or increasing your taxable losses. With over 12 years’ experience in this field, we’ve developed a flexible R&D tax credit claim process to help minimise your stress and maximise your entitlement.

What you will learn on this page:

R&D tax credits explained

What are R&D tax credits?

Research and Development (R&D) tax credits are an incentive to reward companies engaged in innovation. A UK tax relief, R&D tax credits can provide valuable funding for any company spending money on developing new products and process or improving existing ones. This relief can give your business the opportunity to claim back a proportion of your R&D expenditure as tax credits, which can reduce your tax bill or increase taxable losses. No matter the sector, if you’re spending money on research and development, then you could be eligible to claim R&D tax credits.

 

Is my company eligible for R&D tax credit relief?

Research and development plays a massive role in any business with an aim to remain competitive. Without an R&D program companies may struggle to thrive within their market relying on mergers and acquisitions in order to innovate. The R&D Tax Credit scheme empowers innovating businesses providing funding allowing them to release their next idea or improve existing products.

Your business may qualify if that meet the following conditions;

  1. You are a limited company in the UK subject to Corporation Tax
  2. Have carried out qualifying research and development activities
  3. Have spent money on R&D projects

There are a few requirements for any business claiming R&D tax credits and our quick and easy tool can help you identify your eligibility for the scheme. To find out if you do qualify check your eligibility below or get in touch to speak to a member of our team.

Available to both SMEs and large companies across all sectors, the Research and Development Tax Credit scheme is a government incentive designed to reward innovating businesses with up to 33p for every £1 spent on qualifying activities.

Whether you’re a scientist inventing new medicine or an engineer developing a new process or improving an existing one. Whether you work in a field, factory or behind a computer. If your business is spending money on activities that are aimed at finding a solution to a problem.

Irrespective of whether your project succeeds or fails you could be eligible to receive R&D tax credits.

A valuable source of funding, R&D tax credits can release the finance you need to fund your next great and idea and we can help.

Releasing you to innovate.

Check your eligibility for R&D tax credits

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We can help determine if you're eligible for R&D tax credit. Get in touch today.

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You should be eligible!

You should be eligible for R&D tax credits. At MPA, we have extensive experience in ensuring your claim is accurate and that your value is maximised. Did you know, the average R&D tax claim submitted to HMRC was £54,000.
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What are qualifying activities?

Whether you are developing products in a lab or refining a manufacturing process as long as you are making an advance in science or technology, you could qualify for R&D tax credits. It could be a project to develop a new process, product or service.

HMRC have provided guidance on what types of activity needs to be present in the project for it to qualify for the relief:

  • an aim to advance science and technology
  • uncertainties that have been overcome
  • uncertainties that you have tried to overcome (not all projects need to be successful to qualify)
  • the project should not be something that can easily be solved or understood by a professional the same field

What counts as R&D?

The main part of an application for R&D tax credits is knowing what you can and can’t claim for. In most instances you can claim R&D relief on revenue expenditure, i.e. day-to-day operational costs, but not capital expenditure (money spent on fixed assets such as land and buildings), or the cost of using or creating a trademark and the production and distribution of goods and services within claim. Below we have outlined some key areas which you can include in your claim:

  • Direct staff costs – employees who have worked directly on the R&D project and include costs such as; gross salaries.

What does this include? Wages, overtime and cash bonuses), employer NI contributions, employer pension contributions and certain reimbursed business expenses. Independent contractors (or ‘externally provided workers’ – EPWs) and subcontractors can be included in a claim but there are some specific rules around what can be included in a claim.

  • Software – Software which was needed for R&D or involved in R&D activities may be included but must have been developed / purchased for the R&D project.

Can I make a 100% claim on software? If the software was partially used for the R&D project, then its price must be apportioned. However general software such as email hosting, Microsoft Office, ERP and MRP software costs and website hosting would be excluded.

  • Consumables – Materials and resources that are used up / consumed in your R&D process, such as water, fuel and power can be included in your claim.

Are all my material costs included? Costs can be either apportioned expenses or wholly R&D expenses. But you can’t claim for materials which were not used up in the R&D process or used for products which were sold onto a client.

  • Subcontracted R&D – If a portion of your R&D project has been outsourced to another company for an agreed amount, you can include that in your claim.

How much can I claim? Companies can claim up to 65% of their subcontracted R&D costs, but only under the SME scheme.

  • Clinical volunteers – Usually only relevant to pharmaceutical firms, the payments made to volunteers in clinical trials are eligible.

If you want to know how much your claim could be worth use our free R&D calculation examples.

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How much can I claim?

Types of R&D

The amount of money that you can get back in your claim depends on the scheme that you qualify for. There are two main schemes which we have outlined below the main differences being the size of your business, the amount of Corporation Tax that you are paying and whether you are profit or loss making. Irrespective of your business there is benefit in making a R&D claim as you can receive a return between 14.5% and 33% for SMEs.

SME R&D tax credits

If your business employs fewer than 500 employees and has an annual turnover not exceeding €100 (£86) million or a balance sheet not exceeding €86 (£74) million, you would qualify for the SME R&D tax credit scheme. With this scheme businesses have the opportunity to offset up to 33% of your R&D costs against your Corporation Tax and in some cases, you can receive this as a cash credit from HMRC.

There are a few factors that can affect your claim as an SME, if you are receiving a grant, subsidy, receiving state aid or using subcontractors to support part of your R&D project then you may need to make a claim via the RDEC scheme, or both. Also if your staff headcount is lower than 500, but you exceed both the turnover and gross asset thresholds, you will be classed as a large company for R&D relief and be assigned to the RDEC scheme.

It can be a bit confusing understanding where your business may fit in. If you are in this position speak to our representatives to discuss your specific business needs, join us on live chat below or contact us.

Research and Development Expenditure (RDEC) scheme

Previously known as the Large Company scheme, the RDEC scheme is for companies with 500 or more employees, revenues over 100 million euros, and a balance sheet of more than 86 million euros. The level of tax relief can be worth around 12% of the money spent on R&D, which can mean you can earn 10p for every £1 spent on qualifying R&D. As with the SME scheme the credit can be off set against your tax liability or payable in cash.

Use our R&D tax calculator to estimate the amount you could receive from making a claim. Simply enter your estimated R&D spend into the box or using the slider and click calculate.

Tax calculator

Tax calculator

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Speak to a member of the team to see how we can help you access this funding.

Get a quick estimate of your potential claim value

Drag the slider or enter your estimated R&D spend and click calculate to see your estimated claim value.

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Your claim estimate:

Your spend estimate £50,000

How we work

Our R&D claim process

Our insight and experience will help you get the best results. Having worked with the HMRC for many years, we really speak their language — and can use our expertise to translate the rules and regulations for you. We’ll combine this with our knowledge of taxation, and advise you how you can put the funds from your claim back into your business.

Our 4 step process below is designed to carefully analyse your business to understand the costs that you have incurred that might be eligible for tax credits. In 2018 alone we have been able to help over 600 innovative businesses take another step forward.

 

Step 1 – Getting to know you

We know that every business is built in a slightly different way. So an integral part of our process is to get to know you and your business to find out what is important to you, where you are in the market and where you want to go. With a team of analysts based across the country, we have the flexibility to offer either a phone call or an onsite visit. We know that time is a major factor in all businesses, so we can be flexible and work around you. In this meeting we would usually explain our processes and how we will work together.

 

Step 2 – Data gathering meeting

As much as we take up most of the work in preparing your claim, we do need your input. In this meeting we get into the detail of what your company does and which projects will form your claim. HMRC have outlined a set of criteria in order to identify eligibility, our technical analyst will explain what these are and identify which of your products or services would qualify for the scheme.

We have found that using technical analysts with experience in your specific sector, is a great way of identifying the aspects involved in creating or making a product or new process. With an understanding of the iterative steps that can be found in daily activities they are able to uncover details that can help maximise your claim value.

 

Step 3 – Generating a claim report

The technical report is an outline of the processes involved in the creation of your product or service and the financial evidence of your spending around it. HMRC have a level of detail that they require to be included in a report and we have an internal team that will ensure that the report meets these. Before we submit the technical report a draft will be sent to you for review.

Our aim is to make sure that you can continue to realise your maximum potential through innovation. And in order to ensure that you receive the maximum R&D tax relief possible, our process in submitting your claim includes a review of your company financials by our team of tax specialists, who will agree on your tax position and notify you of any changes to optimise your overall tax position.

Step 4 – Managing the claim

Once you have signed off the technical report we will submit it to HMRC. We are confident in our process and as a standard part of our service we provide enquiry defence, so in the event that HMRC has any questions we will communicate with them on your behalf.

HMRC has its own internal process which can sit outside our estimated delivery times, but our dedicated support team maintains regular communication so that we can keep you updated on the progress of your claim.

Once the claim is successful and HMRC has made payment of your claim we will pass the money directly on to you with a detailed explanation of how the tax savings have been calculated and applied.

Download our R&D tax claim process

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