What is R&D tax relief?

The Government tax relief rewards innovation by enabling businesses to reclaim part of their investment on research and development activities, through a reduction in corporation tax liabilities or a cash repayment from HMRC.

Do I qualify?

To qualify for the SME R&D tax credit scheme, you must be a UK limited company with:

  • Less than €100m turnover
  • Less than €86m balance sheet
  • Fewer than 500 employees

Large companies and some that receive specific Government grants do also qualify, but only for the R&D expenditure credit (RDEC).

How does claiming a Government grant affect my R&D claim?

We always encourage business owners to take strategic advice before accepting Government grants, whether UK or EU wide. Certain business funding can disqualify an entire project from being eligible for R&D tax relief, which can often be a greater reward than the grant itself.

What R&D activities are eligible?

In fewer than 15 minutes, our R&D tax experts can identify whether you’ve a claim worth pursuing.

Lots of businesses have heard of R&D tax relief but most think it’s only applicable with scientific research. Yet in fact, sectors including food & drink and manufacturing are some of the biggest investors in research and development.

The type of activities that qualify are wide ranging, with many companies unknowingly performing R&D tasks daily. Whatever your sector, if you’re finding new ways to improve products, processes, quality or efficiency, through advancements in technology or science, then you will qualify for R&D tax relief.

Many of our R&D clients had never considered R&D tax relief to be relevant to their operations but Champion’s in-depth knowledge of the R&D tax credit scheme and their business meant they were able to successfully make a claim. Our R&D clients range from breweries to manufacturers, IT specialists to retail businesses.

The project failed, can I still claim?

The short answer is yes. A claim is still valid even if the project in question doesn’t succeed. If you’ve encountered technical challenges and an answer is not readily deducible to a professional in the field, and your work fails, it absolutely satisfies the criteria for R&D relief.

What can I claim for?

You can reclaim costs for staffing, materials, software, consumables, utilities and even some travel. However, costs for rent, dividends and patent protection are all excluded.

A large proportion of qualifying R&D costs are usually salaries, but do consider who completes the work as the relief that’s available differs between employed staff and sub-contractors. Employed staff salaries are 100% eligible whilst sub-contractor costs are reduced to 65%.

Claims  can be made up to two years following the financial year end, which regularly sees first time claimants achieve a large cash refund. Further claims can then be submitted annually to support future research and development activities.

Is claiming complicated?

It’s a common misconception that claiming R&D tax relief is complicated and requires a lot of resource and time. Our qualified tax experts and R&D advisors take away the hassle and do all the legwork, analysing the information and preparing the claim on your behalf, ready for review and submission.

On average, our clients spend just 2-3 hours of their own time on an R&D claim, which is usually during an initial meeting with the directors/technical teams and providing the essentials information.

The average R&D claim made by our advisors is £47,572, so definitely worth those few hours of admin time.

Is it tax avoidance?

Not at all. R&D tax relief is a statutory relief and anyone performing research and development activities is eligible to claim.

How does R&D relief affect dividends?

In most instances, dividends are still the most tax efficient way of sharing profits amongst directors or shareholders, yet this may not be the case when claiming R&D tax relief.

If a director performing high levels of R&D activities receives £100,000 in dividends, then none of this amount would be eligible for relief. If the same director received this as salary, then the whole amount would be eligible, meaning businesses must weigh up the benefits of their remuneration policy.

How much can I claim back?

Under the SME R&D tax credit scheme you can claim up to £43.70 on every £100 spent.

Under RDEC you can claim £28.72 on every £100 spent.

Can I claim if I’m making a loss?

Yes you can. You can surrender losses carried forwards for a cash repayment equal to 14.5% or you can carry losses forwards against future profits.

See how much you could claim and contact us today:

Contact our lead R&D advisor, David Herd, on:

E: David.herd@championgroup.co.uk

T: 0161 703 2500