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Research and Development (R&D)

What is Research and Development (R&D) tax credits?

If your company has worked on a project to research or develop and advance science or technology to overcome a problem within your workspace then you may be entitled to R&D tax credits.

You may come across a customers problem, or one which you encounter on a daily basis, where there does not look to be a solution to move forward.  If you have taken time and money to research a solution for this problem by creating software, materials, products, services or a source of knowledge then this can be declared in your yearly tax returns and can be paid as a yearly corporation tax relief if you meet HMRC’s criteria.

Tax Advisory UK can help you with all your tax planning and tax investigations offering the best client service available in the industry.

Our goal is simple, to provide all our clients with tax-saving solutions by engaging you with highly regarded Chartered Tax Advisors (CTA) and respected Tax Investigators.

R&D criteria

There are certain criteria that HMRC will accept as R&D tax credits and you will need the proof to present to HMRC of this criteria.

R&D relief projects must be designed to make an advancement in science or technology.  The solution of the R&D project must relate to your trade or you intend to start up in this industry based on your results. 

You can submit financial and technical information to HMRC such as staff wages, software and qualified subcontractors in your field to prove your project is eligible for R&D tax credits.

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

How to prove your R&D project was successful

Your project cannot be an existing science or technology that is being used for the first time in your sector.

You have to show that the problem has not been solved previously by a professional in the same industry.  You can do this by supplying failed attempts of the problem that your team has made an advance in.  Your own team of professionals would have to provide notes of how they overcome any problems to improve the science and technology.  Work emails, reports, project plans, subcontracting contracts and expenses are all used as evidence of R&D.

The time spent on a project is not always enough proof for HMRC and if there was a large sum of financial backing to prove the wage of the professionals you used, this can be submitted as well.


Types of R&D relief

There are two types of category that R&D falls into and this is small and medium-sized enterprises (SME) and large companies.  To determine what is a large or small and medium-sized enterprise takes some factors into account.

Large Company

A large company has:

  • over 500 staff and 
  • a turnover of more then £100 million or
  • a balance sheet of more than £86 million

A large company could claim R&D costs of up to 10%.

Small and Medium-sized enterprises

SME R&D relief allows companies to:

  • deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction
  • claim a tax credit if the company is loss making, worth up to 14.5% of the surrenderable loss

Contact Tax Advisory UK today and we will arrange a meeting with some of the UK’s most qualified and experienced Chartered Tax Advisors to help with all your Research & Development inquiries.  Please call 07908 074954.

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