R&D (research and development) tax credits should definitely be considered by innovative UK businesses. If your claim is successful, your business can receive significant financial rewards, either in the form of a cash rebate or by a reduction in corporation tax liability.
The R&D scheme was launched back in 2000 by the UK government to help drive forward innovation and growth. Since its launch, the popularity of R&D tax credits has grown but, unfortunately, there are still many businesses out there who are eligible but don’t claim. This means that the vast majority of eligible businesses are missing out on thousands of pounds.
At Green Jellyfish we frequently see the immense and positive impact that R&D has on businesses. It’s therefore an area we are hugely proud to work in. Here are our top reasons to claim research and development tax credits.
An expansive range of costs are eligible
Before submitting an R&D claim, the first step is to find out what costs you can and cannot claim for. Once this has been established, you can calculate how much your claim could be worth. This is where our amazing R&D calculator can help you out. It is easy to use and it does all complex calculations for you!
Usually, there are 8 types of qualifying costs when it comes to making an R&D Tax Credit claim:
- Contributions to independent research
- Direct staffing costs such as employers NICs and staff wages
- Clinical trial volunteers
- R&D consumables used up directly in the R&D process
- Subcontracted R&D
- Externally provided workers
With each category, there are of course some exceptions HMRC are very particular about this and that’s why we highly suggest speaking to us so your application is correct first time, as any mistakes can result in stressful and expensive HMRC enquiries.
There is no minimum amount which companies need to spend on qualifying R&D projects
To claim your R&D Tax Credit there used to be a minimum spend requirement of at least £10,000 on relevant R&D activities, however in 2012, the rules changed and now you can apply for R&D Tax Credits for even the smallest of amounts, which is perfect for smaller, lower spending businesses.
Any Sector Can Claim!
One of the great things about the R&D scheme is that any business in any sector or industry is invited to apply. Its not just companies working in the scientific and technology sector. As long as the company is based in the UK and registered to pay Corporation tax then its innovative activities are eligible to qualify.
To claim as an SME, businesses should:
- Have 500 employees or less
- Be a UK limited company
- Been trading for more than 12 months
- Have an annual turnover of no more than 100 million
Meanwhile, larger businesses should apply for R&D Tax Credits through the research and development expenditure credit (RDEC) scheme. Under this scheme, companies can claim R&D tax relief of up to 230% of eligible expenditure. They could claim expenses for materials, staff wages, certain subcontracting costs and consumables.
A real benefit of scheme is that you can still claim even if the R&D project failed in its objectives, as long as technical and/or scientific investment was made.
Even if the Company is Making a Loss They Can Still Claim
In the past, we have found that many businesses do not claim R&D Tax Credits if they have not produced a profit, wrongly believing the scheme is only for profit-making businesses
Companies that are making a loss can receive R&D as long as the application gets approved by HMRC. How much a company will receive, however, will depend on the size of the business.
- Loss-making larger businesses or projects that have been subsidised can get relief totalling 9.7% of eligible R&D expenditure.
- Loss-making SMEs can receive between 14.5% and 33% of qualifying R&D expenditure.
Loss-making SME firms can additionally decide to not surrender the R&D loss but instead move it forwards/backwards against profits.
The process of claiming R&D isn’t as straight-forward for loss-making companies, which means it’s especially important to consult a specialist before getting started. When you come to us for advice, our team of consultants will work with you to get a complete understanding of your company’s past and future tax position. We will help you maximise the R&D relief benefits that you are entitled to.
How can Green Jellyfish Help You?
Green Jellyfish is made of up of an expert team of R&D tax consultants ready to help you. We will be more than happy to answer any questions or concerns you may have, so do not hesitate to contact us!
Sign up to Green Jellyfish today and begin your R&D claim.