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HMRC have just released provisional R&D tax credit data for 2020. As is the case with previous years, statistics for 2020 are not yet complete and should be viewed as provisional, until the data is revised next year. Below are some key findings taken from the report.
Research and Development (R&D) Tax Credit is designed to support companies that are working on particular innovative, scientific or technological advances. This could be anything from designing a new product, service or process to enhancing one that already exists. It can even be claimed on activities which were unsuccessful and to help companies which are loss-making.
Essentially, in order to qualify for R&D Tax Credits, the work must mean advancement in the overall field, not just for your own company. This means that an existing technology being used for the first time in your industry doesn’t count towards the relief.
The relief is received either as a reduction in a company’s Corporation Tax or as a cash payment from HMRC.
Work undertaken must be part of a specific project to make an advancement in science or technology. It cannot be in a theoretical field, for example pure maths, or a social science like economics.
The project must also be in relation to your company’s trade – either one that will be started once the R&D activities are complete, or one which currently exists.
To receive R&D Tax Credits, you must be able to explain to HMRC how the work:
There are two branches to the scheme, one for small and medium sized enterprises (called the SME scheme) and one for larger organisations (the RDEC scheme).
Small and medium sized enterprises (SMEs) should apply for their R&D relief using the SME programme, as long as:
You may need to include groups, partnerships and linked companies when working out if you’re an SME.
SME R&D Tax Credits will allow your company to:
Larger companies should make their application under the Research and Development Expenditure Credit (RDEC) scheme. However, this scheme can also be used by SMEs and larger companies who’ve been subcontracted to do R&D works by another larger company.
Tax Credits under the RDEC scheme allow 13% of a company’s eligible R&D expenditure, which is notably less generous than the SME scheme.
At Myriad Associates we deal with companies looking to claim R&D tax relief and we have years of expertise at our fingertips. Our team is made up of a range of tax advisors and specialists who understand the complexities around R&D Tax Credits, and will be happy to guide you through the application process.
Call us on 0207 118 6045 or use our contact page for personal, tailor-made advice.