Is my business eligible for research and development tax relief?
The R&D scheme is open to both SMEs and larger companies across all sectors.
The main requirement is that you demonstrate scientific or technological innovation and advancement.
The definition is broad in scope, and you will need to put forward a compelling case to prove your R&D project satisfies the requirement and is eligible for relief.
We have the experience to advise on project eligibility and evidencing your claim. For example, we routinely engage with business’ R&D staff to ensure we have covered all areas of cost and R&D activity within your claim.
How do I make a claim for research and development tax relief?
You make your claim for research and development tax relief within your corporation tax return. This would usually be two years after the end of the relevant accounting period. Relief is given by either reducing the amount of corporation tax payable if you are making a profit or, where you are in a loss position, by claiming a payment direct from HMRC or carrying the resulting loss forward to future accounting periods
When completing your CT return, it will be important to submit the right figures within the right section. This includes submitting additional information in support of your claim. While not mandatory, in our experience, this helps to build a compelling case.
And while you are not required to keep specific records in support of your R&D tax relief claim outside the usual CT requirement, you may be asked as part of an HMRC compliance check for your company records to support your claim. We can provide practical guidance on record keeping.
What costs come under the research and development scheme?
You can only make a claim against ‘qualifying spend’. This covers revenue expenditure only, not capital expenditure.
For capital expenditure, the R&D capital allowances scheme may apply.
Qualifying costs must be attributable directly to the specific R&D activity being claimed for. Examples could include the cost of people involved in the R&D (staff, trial volunteers) and the cost relating to software, utilities and materials used or consumed when carrying out the R&D.
We can advise specifically on which of your costs would be classed as qualifying spend.
What if my business made a loss?
Depending on your circumstances, instead of carrying forward a loss, you may opt to receive research and development tax credits in the form of cash-back from HMRC. We can provide advice based on your particular circumstances.