Are you missing out on research and development tax credits? A lot of companies are eligible to claim back thousands of pounds from HM Revenue & Customs (HMRC) in the form of R&D tax credits, yet they don’t realise it. To ensure this does not happen to you, read on to discover everything you need to know about tax credits for research and development.
What are R&D tax credits?
Introduced in the UK in 2000, tax credits for research and development allow you to claim back money your company has invested in research and development. You are actually able to claim back anything up to 32.6 per cent of your research and development costs. This could easily amount to hundreds and even thousands of pounds.
Why does the government allow you to claim for this?
The government wants to generate an innovative business culture in the UK. To do this, they need to encourage UK businesses to invest more money in research and development. Tax credits are an incentive to help them achieve this. They are incentivising businesses to develop existing products, processes and services, as well as new ones.
As you may well imagine, to be eligible for R&D tax credits, you need to meet certain requirements. Firstly, your company needs to be liable for corporation tax, as you will make your R&D claim when filling out your CT600 Corporation Tax Return.
Aside from this, you need to prove that your business has taken a risk by doing something innovative, whether this means improving a service, developing a product, or creating a new process. If you can do this, you will qualify for R&D tax credits.
Finally, if you are eligible for R&D tax credits, you will probably be wondering what expenditure you can claim for.
You will be able to claim on revenue expenditure. In some circumstances, you can also claim on capitalised revenue expenditure. This includes consumable items, i.e. materials, power, equipment, light and such like, as well as the cost of hiring any freelancers or subcontractors. Capitalised revenue expenditure also covers staff costs, which can include employers’ NIC and gross salary.
Tax credits for research and development – where to find out more
We can help obtain funding for your research and development project – please get in touch if you’d like to discuss this with us.
Find out more about our services on our business finance solutions page.