Research and development (R&D) tax relief is a valuable tax relief that can significantly reduce a company’s corporation tax liability. In some cases, the company will receive a payable tax credit.
R&D tax relief is a means of encouraging companies to innovate through a cash reward for developing new technologies to substantially improve products, processes, devices, materials and/or services.
The R&D tax credits are available to all companies and we have experience of preparing claims for a range of companies from traditional manufacturing and engineering companies to software technology companies. Both Large and SME companies can claim if they undertake qualifying work. The development does not need to be successful – abortive or failed projects can be included also be included in the claim.
Costs incurred in undertaking eligible development work can qualify for enhanced tax relief include:
- Staffing costs and agency workers – for time spent directly and indirectly on R&D.
- Consumable items – including power and water costs, software used for R&D.
- Certain payments to sub-contractors.
For SME Companies, the additional tax relief can effectively deliver a tax repayment of between 25% -33% of qualifying R&D expenditure.
Under the Large RDEC scheme, a tax benefit of 11% can be obtained on qualifying R&D expenditure
A claim for R&D tax relief and credits must be made within two years of the expenditure being incurred, depending on the date of the company’s accounting year end.