Frequently Asked Questions
Is your innovative company missing out on R&D tax credits to fund essential research and development projects to continue growth? Many companies are missing out on claims because they are unaware R&D tax credits exist, they are deterred by the complexity of the process or they believe the misconception that the scheme is solely for science and tech businesses.
Learn everything you need to know about R&D tax credits with our FAQ’s below. If you have a question that cannot be answered below, or you would like further advice, please don’t hesitate to contact our technical team who will be happy to help.
What are R&D Tax Credits?
Research and Development (R&D) Tax Relief and Credits support companies that work on innovative projects in science and technology. The scheme is applicable to companies that are creating or developing new products or processes or changing existing products and processes in an appreciably improved way, for example, so that the process is faster, the product cheaper to produce or the method or material used more efficient.
Any type of company can apply for the relief provided it is taking a risk by trying to resolve scientific or challenging technical uncertainties which are not easily deducible by a competent professional, which means that finding a solution is complex.
What projects qualify for R&D Tax Credits?
The work that qualifies for R&D relief must be part of a specific project to make an advance in science or technology. It cannot be an advance within a social science – like economics – or a theoretical field – such as pure maths. The project must relate to your company’s trade – either an existing one, or one that you intend to start up based on the results of the R&D. To get R&D relief you need to explain how a project:
- looked for an advance in science and technology
- had to overcome uncertainty
- tried to overcome this uncertainty
- could not be easily worked out by a professional in the field
Your project may research or develop a new process, product or service or improve on an existing one.
How far back can you claim R&D Tax Credits?
What costs qualify for the scheme?
- Staff costs. You can claim the salaries of staff directly involved with the R&D project
- Consumable items
- Externally Provided Workers (EPWs)
- Research Contributions
- Clinical Trial Volunteer Costs
What costs cannot be claimed under the scheme?
Costs that cannot be claimed for include:
- the production and distribution of goods and services
- capital expenditure
- the cost of land
- the cost of patents and trademarks
- rent or rates
I do not work in the scientific sector - does my industry still qualify for the scheme?
Can you claim if you are a large company?
Yes, large companies can claim a Research and Development Expenditure Credit (RDEC) for working on R&D projects.
RDEC replaced the large company scheme in April 2016.
RDEC can also be claimed by small and medium-sized enterprises (SMEs) who have been subcontracted to do R&D work by a large company or who have received a grant or subsidy for their R&D project.
How much could my benefit be worth?
The SME R&D tax relief scheme allows you to deduct an extra 130% of qualifying costs from your yearly profits, as well as your normal 100% deduction, totaling 230%. If your company is making a loss, you can claim a tax credit worth up to 14.5% of the surrenderable loss.
Large companies can claim a Research and Development Expenditure Credit (RDEC) for working on R&D projects. The RDEC is a tax credit, and is 13% of your qualifying R&D expenditure.
How long does it take to receive the tax credit?
How will I receive my benefit?
R&D is a Corporation Tax (CT) tax relief that may reduce your company’s tax bill if your company is liable for CT or, in some circumstances, you may receive a payable tax credit.
What qualifies as an SME under the scheme?
You can claim SME R&D tax relief if you’re a company with:
- less than 500 staff
- a turnover of under 100 million euros or a balance sheet total under 86 million euros
You may need to include linked companies and partnerships when you work out if you’re a SME.
Can I claim if I am a soletrader
Unfortunately, it is unlikely you can claim if you are a soletrader. Sole traders do not pay UK Corporation Tax and, as a result, they cannot claim R&D tax credits. R&D tax credits are form of Corporation Tax relief and so — if you’re a sole trader — you’re not registered for UK Corporation Tax and cannot make a claim.
Can I claim if my project has been unsuccessful?
Great news! R&D tax relief can even be claimed on unsuccessful or aborted projects. Provided you have tried to or successfully overcome uncertainty, there’s a strong basis for a claim.
Can I claim if I am not a limited company?
If I have capitalised my R&D expenditure, could I still claim?
No, capitalised cost do not qualify. However, development costs that have been capitalised under intangible assets can be included.
If you have any questions about your claim and the possible inclusion of capitalised expenditure, please contact one of our technical experts.
Claiming R&D Tax Credits sounds like a lot of work - where will I find the time?
Our techical specialists do all the work that goes into claiming R&D tax credits so that you don’t have to. We know your time is precious, so in asking the right questions to assess your eligibility to claim, we make the process as easy as possible.
We would love to find out more about your business and how we might be able to help you compile a Research and Development tax claim. Please contact us today to book a consultation with our team.