Fund your innovation by claiming R&D tax relief

How to fund your innovation by claiming R&D tax relief

R&D tax relief can transform your business! If your company invests in research and development, you can claim back up to 33% of the costs.

Read on to find out what credits are available and how to make a claim.

What are R&D Tax Credits?

It’s paid in the form of either cash payments or credits (tax reductions) for companies that are spending on innovation.

The definition is very broad. It just means you have taken a risk in attempting to create innovative new products, processes or services, or improving existing ones.

In HMRC’s language, by spending on research, you are looking to resolve “scientific or technological uncertainties”.

Which industries can claim R&D tax relief?

Any industry and any sector! Innovation is often associated with scientific laboratories, but it’s just as common in areas like AI (artificial intelligence), pharmaceuticals, food and drink manufacturing and engineering.

What’s the definition of R&D spending?

There are four requirements for an eligible project:

• Qualifications – you’ve employed engineers, developers or other competent professionals
• Innovation – the outcome of the research must be innovative, i.e. not common knowledge
• Cost – the higher the better, although there is no minimum spend
• Scientific or technological uncertainty – you are not sure whether or not it will be possible.

Innovation is often associated with laboratories but companies in any industry and any sector can claim R&D tax relief.

What is a “competent professional”?

It’s someone who is well versed in, and knowledgeable about, your research and development activity. They should be a specialist in your industry with the appropriate qualifications, experience and skills for the job.

What kind of R&D spending is eligible?

• Staffing costs – including salaries, employer-pad NIC and pension contributions, and reimbursed expenses
• Subcontractor and freelancer fees
• Materials and consumables – heat, light and power used in the R&D process
• Some types of software
• Payments to subjects of clinical trials.

Does my company qualify?

You must be a limited company in the UK, have carried out qualifying R&D activities and spent money on those projects.

There are two types of R&D relief available, depending on the size of your company.

Less than 500 staff

• turnover under €100m OR balance sheet total under €86m è SME R&D relief 

Over 500 staff

• turnover over €100m OR balance sheet total over €86m è R&D expenditure credit (RDEC)
• turnover under €100m OR balance sheet total under €86m è SME R&D relief

How much can I claim?

It depends on the amount you’ve spent on R&D and the particular scheme.

• SME R&D relief – you can claim back up to 33%
• R&D expenditure credit (RDEC) – you can claim back up to 13%

The average size of claim received is £55,000 for SMEs and £600,000 for large companies.

How does it work?

Once you’ve identified qualifying expenditure, you enhance it by the relevant rate according to the scheme. The enhanced expenditure is deducted from your taxable profit as a tax reduction, or added to your loss.

If your company is claiming for the first time, you can claim for up to two tax years’ worth of spending on R&D projects.

The average size of claims received is £55,000 for SMEs and £600,000 for large companies.

How long does it take to receive payment?

HMRC takes about 4-6 weeks to process claims and the payment is made immediately afterwards.

How can I find out if my claim is eligible?

The quickest way is to head over to FI Group’s My R&D Claim website (www.myrndclaim.co.uk/). It’s a simple 4-step process:

• Step 1: Check your eligibility (it only takes 10 minutes!)
• Step 2: Upload your project and associated costs.
• Step 3: Your information is reviewed by FI Group experts
• Step 4: Amend and download an HMRC-compliant technical report and submit to HMRC.

If the claim is successful, FI Group’s fee is 3% fee of your R&D expenditure. You don’t pay anything if it isn’t, although FI Group has a 100% success rate on all claims!

Why has Credit Passport chosen to partner with FI Group?

Because you could not be in better hands. FI Group works with you throughout the entire process, from scoping the claim to submitting it and answering HMRC queries. Its experienced consultants work directly with your competent professionals to identify eligible R&D activities and maximise your claim.

Find out more about FI Group by watching this short video on YouTube: https://youtu.be/6es4Ej8hWVY