Commentary

By Tom,

Around two thirds of eligible companies have never made an R&D Tax Relief claim

Although the government’s Research and Development Tax Relief Scheme was launched nearly twenty years ago in 2000, around two thirds of eligible companies have never made a claim; we’d like to change this…

The above graph shows expenditure by UK businesses on performing research and development in current prices, by largest product groups, from 2010 to 2017.

 

Give us a ring or drop us an email if you’d like to find out whether your business is eligible for an R&D tax rebate!

FACT BOX
  • UK R&D expenditure grew, expanding by £1.1 billion to £23.7 billion in 2017, up 4.9%

  • Software development saw the largest R&D growth, up £358 million (34.7%) on the previous year

  • London had the largest growth in regional business R&D expenditure, increasing by £448 million (19.1%) to £2.8 billion

  • In 2017, total UK business employment in R&D grew by 7.4% to 231,000 full-time equivalents

  • However, two thirds of eligible companies have never made a claim!

Is your business eligible?

It’s our experience that most small businesses have at least heard of R&D. The problem is that a lot of them don’t know what can be claimed as R&D. Business owners may be surprised to learn what they may be able to claim on. Additionally, retrospective claims can be made, going back as far as two accounting periods. Often, this has allowed us to secure a nice lump sum, courtesy of the Revenue, for businesses we’ve helped submit claims. And bear in mind, we only charge a small percentage of the total value of the claim, so, as far as business owners are concerned, there’s nothing to lose and often plenty to gain in the form of a cash injection from HMRC.

What costs qualify for R&D Tax Credit?

Direct and externally provided staff, subcontracted R&D, consumables, software, trials, prototyping and independent research costs may all qualify for R&D Tax Relief. Capital expenditure does not qualify under this scheme, nor does expenditure on the production and distribution of goods and services.

Essentially, the following types of R&D qualifying expenditure:

  • Staff, including salaries, employer’s NIC, pension contributions and reimbursed expenses.
  • Subcontractors and freelancers.
  • Materials and consumables including heat, light and power that are used up or transformed by the R&D process.
  • Some types of software.
  • Payments to the subjects of clinical trials.

Not all costs qualify though. The company cannot receive R&D Tax Relief for:

  • The production and distribution of goods and services.
  • Capital expenditure under either of the R&D Tax Relief schemes. However, a generous 100% Research and Development Allowance may be due on capital assets, such as plant, machinery and buildings used for R&D activity.
  • The cost of land.
  • Payments for the use and creation of patents and trademarks, as these are the cost of protecting the completed R&D. This also includes the staff costs in relation to the time spent by all staff on the preparation and submission of such applications.

For more information on R&D Tax Credits, please don’t hesitate to get in touch.

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