R&D Tax Credits enable businesses that incur costs in developing products, processes, software or services to receive a corporation tax deduction or cash payment from HMRC. Myriad Associates will ensure your R&D tax credits is fully maximised.
We've created 6 simple sections to help you understand how R&D tax credits work and whether your business could make a claim.
The research & development (R&D) tax credit is designed to encourage innovation and increase spending on R&D activities for companies operating in the UK.
It's one of the UK government's top incentives for encouraging investment in research and development and allows up to 33.35% of a company's R&D spend to be recovered either as a reduction in Corporation Tax or a cash repayment.
The total number of R&D tax credit claims that were made in 2020 was 85,900 which is a 16% increase from 2019. That took the total amount of R&D tax relief paid out last year to £7.4 billion.
Any company in any industry may be eligible for R&D Tax Credits.
To meet the requirements, the company must have undertaken qualifying research and development activities.
R&D tax credits can be a valuable form of financial support for all businesses. In addition, it is helping businesses across all sectors in the UK develop some of the world's leading products, processes and services.
R&D Tax Credits provide an essential source of non-repayable funding for many small, medium and large enterprises.
R&D Tax Credits help encourage businesses to invest in R&D and innovation.
Every £1 spent on public R&D delivers approximately £7 of net economic benefit to the UK and unlocks £1.40 of private R&D investment.
R&D Tax Credits help put the UK at the forefront of R&D and innovation across the globe.
"We have been working with Myriad for a number of years and I am delighted with their thoroughness to ensure we capture all of our claimable R&D expenditure. They are a great company and we certainly enjoy working with them! The whole process is seamless"
Managing Director, Charpak Ltd
If your company is taking a risk by innovating, improving, or developing a process, product, or service, then it is likely that you will qualify for R&D tax credits.
A good test to determine if the work undertaken qualifies as R&D is whether your project team faced uncertain outcomes at the start of the project.
That means that your team did not know from the outset whether a particular outcome was achievable.
If you can show that your project goes beyond simply applying existing technologies, then you may be eligible to make a claim.
There are two different schemes for R&D tax relief depending on the size of your company and whether the project has been subcontracted to you or not.
1) The SME R&D tax credits scheme
2) The large company scheme, also known as RDEC (Research and Development Expenditure Credit).Find out which scheme you're eligible for
SMEs are companies with fewer than 500 employees with a turnover below €86 million. Companies above the SME threshold are classed as large companies.
This R&D tax credits calculator will provide you with an estimate of the corporation tax savings that you may receive from HMRC following a claim for R&D tax relief.
R&D tax credit claims are monitored and processed by HMRC and you can make a claim going back 2 accounting periods.
Although it is not a legal obligation, we recommend that an R&D technical report is produced that justifies the technical advancement and uncertainties as well as details the eligible expenditure that is being claimed on a project by project basis.
In order to maximise your R&D claim, we recommend speaking with an R&D tax specialist to ensure you're not leaving money on the table.
In the past, we have been able to exceed the claim value for businesses who’ve previously compiled claims in-house.
By profiting from our specialist R&D tax credit knowledge and experience, you can be sure of securing & maximising your R&D tax claim. Typically, we submit R&D tax relief claims that deliver up to 3x more value than in-house prepared claims or those filed by generalist accountants.About Myriad Associates
A business can submit an R&D tax relief claim at any time up to the first anniversary of the filing due date of the company tax return for the accounting period in which the claim is made (paragraph 83E(1) of Schedule 19 to the Finance Act 1998). This means that a business can make a claim for R&D tax relief going back 2 accounting years. The claim can be made in a company tax return or in an amendment to it.
Many businesses don’t realise that they are undertaking eligible qualifying activities. It is not uncommon for their accountants to forget to tell them about R&D Tax Credits or even to tell them that they don’t qualify. If your technical lead (the R&D manager, lead engineer, or lead developer) is struggling to overcome the technical challenges of your project – if they are scratching their head wondering how to proceed, or losing sleep worrying about the technical uncertainties they face – your project will almost certainly qualify for R&D Tax Credits.
HMRC will follow
When you make a claim for R&D tax relief it will be reviewed and processed by one of the HMRC R&D specialist units. It is normal practice for an Inspector at the HMRC R&D unit to review the first claim that is made by a business. The Inspector will risk
One of the conditions for a company to make a claim under the SME scheme is that the expenditure is not incurred by carrying out R&D as a subcontractor. If a ‘large company’ subcontracts its R&D to an SME, then the SME can make a tax credit claim, but only under a Large Company Scheme. Where successful, this will entitle the company to a 25% deduction for qualifying R&D expenditure.
Where the SME is making a claim under the Large Company Scheme, losses arising from that expenditure cannot be surrendered for a payable tax credit.
Generally, if a company has received a grant for a project, this will not prevent them from claiming R&D tax relief. They will
This means that if your company has received a relatively small grant your company could potentially lose money overall, as some grants can significantly reduce what your company can claim in tax relief. The difference between what the company can claim under the Large Company Scheme and the potential claim under the SME Scheme could be much higher than the grant itself. This is why you should always seek professional advice when making an R&D tax credit claim.
(See also: R&D Grants)
You will need to complete a Full Company Tax Return (CT600) and not a Short Company Tax Return.
If you are an SME, you will need to use CT600 (2015) Version 3 and complete the following boxes:-
Common examples of software development projects that may qualify for R&D tax relief include:
Common examples of product and process development projects that may qualify for R&D tax relief include:
HMRC works to process applications for R&D Tax Credits within 28 days. However, the processing time required for HMRC to review and consider an R&D Tax Credit claim depends largely on the nature of the claim itself in addition to the complexity of a company’s structure and its accounting. Even the time of year can make a difference, with peak accounting times such as March and December being particularly busy and resulting in slower processing times.
You can claim relief on costs that have been expensed through the Profit & Loss account and in certain circumstances you can also claim capitalised expenditure (providing that the assets purchased have been classified as Intangible Assets).
The main areas of costs that can be claimed are:
It is not uncommon for an R&D team to consist of many individuals from different parts of the business.
Your R&D project team may include the R&D Manager, a Lead Developer, Engineers, Project Co-ordinators, CAD Engineers, Quality Control and Testing specialists, and Cost Accountants, as well as members of the senior management team.
R&D Tax Credits for profit-making SMEs
The R&D tax relief would enable a profitable SME to reduce the amount of corporation tax they pay on profits for the period, by the amount of the enhanced deduction.
The current R&D tax credits rate results in a 24.7% benefit on R&D expenditure for profit-making SMEs. If the deduction is greater than the SME’s profit for the period, then this will create a loss for corporation tax purposes.
R&D Tax Credits for loss-making SMEs
Where the additional enhanced R&D deduction is greater than the SME’s taxable profit for the relevant accounting period then this creates a loss for corporation tax purposes.
The SME can then decide between the following options:
The company can surrender the lower of the enhanced R&D relief or the taxable losses for the period.
The losses are surrendered for a cash credit (tax credit payable) and the current rate is 14.5%. So as the enhanced R&D tax relief is 230% a cash credit can be worth as much as 33.35p for each £1 of eligible R&D expenditure.
The Research and Development Expenditure Credit was introduced on the 1st April 2013 and replaced the original Large Company scheme entirely on 1st April 2016.
The key difference between the RDEC and the Large Company scheme is that the RDEC allows a loss-making company to receive a payable tax credit.
The RDEC is a taxable receipt and it is paid net of tax to companies with no corporation tax liability. The current RDEC percentage is 12% and therefore at a corporation rate of 20% the net cash benefit to a large company is 9.7% of the qualifying R&D expenditure.
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Is your business registered for Corporation Tax in the UK or are you a partnership with corporate owners?
Have you developed new or improved existing products, processes or services in the last 2 years?
Does your business employ more than 500 people, or does it have more than €86 million in turnover?
Sorry, you must be a UK limited company or be a Partnership with corporate owners to be eligible for R&D tax credits.
In order to qualify for R&D tax credits you must be seeking to advance science or technology within your industry. As you’ve not developed any new or improved any existing innovative tools, products or services, and not re-developed any existing products, processes or services in the last 2 years. It is unlikely you have any qualifying activity. If you’re unsure, email or call us and we’ll help clarify.
In order to claim R&D tax credits, you need to either employ staff or spend money on contractors, consumable items and other items. If you’re unsure, email or call us and we’ll help clarify.
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Congrats!! Based on your previous answers, you will qualify for the SME scheme. If you’d like some help maximising and securing your claim, please email or call us.
Congrats!! Based on your previous answers, you will qualify for the RDEC scheme. If you’d like some help maximising and securing your claim, please email or call us.Speak to an expert Back