How to claim Research and Development tax credits

Are you one of the 97% of eligible companies who hasn’t made a Research and Development claim?

The government are encouraging all forms of innovation and view it as a priority. That is why they are making it easier for companies to access valuable tax credits.

Alongside the common misconception that Research & Development is only meant for the guys in the white coats, there is another which implies that to take advantage of R&D tax credits you must be profitable for it to be worthwhile. However, the reality is different.

Putting time and effort into research and development may not be generating profits currently for your company, but being an innovator in your sector should reap rewards surely? Loss-making companies are also just as eligible as profitable companies for R&D relief as the developments are still being sought. To recognise the R&D work undertaken by loss-making companies HMRC allow them to claim a tax credit equal to 14.5% of the enhanced R&D expenditure. For those running at a loss, such a cash injection could prove invaluable.

For instance a loss-making company spends £50,000 on qualifying R&D. They are entitled to increase this by 130% meaning that their enhanced R&D expenditure is £115,000. The company can elect to surrender this £115,000 for a 14.5% tax credit equal to £16,675 which will be refunded by HMRC. The upshot is that of the £50K spent by the company on R&D, HMRC have effectively contributed one third.

Even if you are doubtful about whether your project qualifies, a brief conversation with a specialist could add clarity.

As always, any queries please contact Richard or Jason on 0845 054 8560.