Overview of the R&D Tax Credit Scheme

The R&D tax relief scheme is available to all UK companies that undertake research and development related activities. Some think that the guidelines are very limiting. In truth, it is more inclusive than the initial impression of others.

By general definition, a company that is eligible to file a claim under this scheme should have invested in research and development of products or processes that are aimed at resolving a difficulty or problem that would not have otherwise been resolved by a competent individual. This could be designing new processes, enhancing existing systems or creating an entirely new one. All of these have the potential of being eligible for tax relief. Some additional examples for which a company may file for R&D tax credits include the following:

  • The company has invested in the employment of developers, engineers or scientists.
  • The company has developed their own software or outsourced the development of such.
  • The company owns patents on products.
  • The company has engaged in the improvement of current processes and software to increase productivity.
  • The company has hired subcontractors to perform technological, design, and execution of scientific work.

Despite the guidelines already published by HMRC, many businesses across the country are still missing out on this benefit. It is often due to lack of knowledge, or a misconception that their company does not qualify.

How much can a company save?

The company needs to be categorised as either profit-making or loss-making in order to get an estimate or idea of how much they can expect to get for filing a claim under the tax relief scheme. In addition to this, large companies are also qualified under the RDEC scheme which is slightly less profitable.

On average, profitable companies may save up to 25% on corporate taxes. For example, if the company has a total of £100,000 spent for R&D, then they may expect a reduction of their corporate tax by £25,000. This is certainly a notable amount to get in return for investing in innovation.

In comparison to this, large companies that are either profitable or loss-making may be eligible for 9.7% of their qualifying R&D expenditure.

Benefits of hiring R&D tax solutions specialists

Companies can choose to undertake the filing of an R&D tax claim by themselves. However, this can lead to mistakes that eventually cause HMRC to enquire regarding the claim.

Specialists guarantee that a company can maximise the accuracy of the claim and help the organisation every step of the way. They can also defend the claim in the event of an enquiry. In addition to this, specialists can help a company save time and money on identifying qualified activities and expenses leading up to the filing of the claim.

Further reading

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