A Simple Guide to R&D Tax Credits

A Simple Guide to R&D Tax Credits

Connor

Sep 14, 2020 | Accounting, Business Tax, Taxation, Tips&tricks

Most people find taxation a difficult and complex topic, but some parts of tax laws are more complicated than others. Often one of the most confusing is R&D Tax Credits, and because it can be complex, lots of companies miss out on tax relief every year.

We’re here to put that right with a simple guide to R&D Tax Credits. Always remember to ask your UK accountant for help to see if you qualify. You might just be surprised!

What Is R&D Tax Credits?

Launched in 2000, Research and Development Tax Credits (R&D Tax Credits) is a UK Government initiative to encourage businesses to become more innovative.

Through researching and developing products and services within their respective industry, they could claim R&D tax relief on their Corporation Tax, or even access cash. This initiative has been confirmed until 2032, but it could be extended.

Who Is Eligible for R&D Tax Credits?

To be eligible to receive R&D Tax Credits, you must satisfy three criteria. These are:

  1. Be a UK Limited Company that pays Corporation Tax
  2. Have performed qualifying research and/or development activities
  3. These activities must have cost the company money

Is R&D Tax Credits Subject to Select Industries?

No, any industry could potentially claim Tax Credits. From chemical engineering and blockchain development to making children’s toys, there really are no limits.

Yet, some industries are much easier to satisfy the qualifying activities than others, namely those rooted in science, healthcare and technologies.

So, What Does Qualify As R&D Tax Credits?

The criteria your activities need to meet is somewhat broad. In fact, HMRC has stated that any company attempting to resolve scientific uncertainties may qualify for R&D Tax relief.

Usually this means:

  • Creating a brand-new product
  • Creating a brand-new service
  • Enhancing an existing product or service

Common R&D Activities You’re Forgetting to Claim

It is true that R&D Tax Credits is available across industries, but most claims are made by those developing sophisticated products and services. Yet, you don’t have to be a group of tech geniuses or medical experts to complete R&D activities.

Some limited companies are completing R&D tasks every year and not realising it, missing out on corporation tax relief, cash – or both!

There is a strong chance that your company is carrying out R&D activities, and as a result, missing out on cash or corporate tax relief every year. The best way to find out if your activities qualify for R&D tax credits is to speak with a qualified UK accountant.

Yorkshire Accountancy is experts when it comes to R&D tax credits and can help you determine whether you are eligible to make a claim. We know we can help companies save money – so come and speak with our team today!

Does the R&D Activity Need to Be Successful?

Interestingly, no it doesn’t!

Even if your attempt at a qualifying activity has failed, you can still claim R&D Tax Credits. You can also include activities that were not benefiting your businesses directly. For example, making a new product for one of your clients may be eligible for Tax Credits.

What Costs Are Involved in an R&D Tax Claim?

When your accountant submits an R&D Tax claim, they will take into account a range of costs to get the most out of your claim. They could include:

  • The cost of staff, contractors and freelancers
  • The running costs of premises while performing these activities
  • Some software and tech costs
  • Payments to people trailing the new product/service for feedback

There may be additional costs that could be claimed. A professional UK accountant can help you understand your claim in full.

How Much Can Be Claimed Back as R&D Tax Credits?

Small companies can claim up to 33p on every £1 spent on qualifying R&D activities. Larger companies could claim up to 13p on every £1 (recently increased from 12p) spent on these activities.

Discover If You Qualify, Today!

If you are unsure whether your activities qualify for R&D tax credits, look no further than our friendly team at Yorkshire Accountancy. We have already surprised business owners with a list of activities that qualify – and we know others are missing out right now.

Speak with us soon to see if you can start saving money on your Corporation Tax!

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