What is R&D?

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In 2000, The government introduced a scheme to benefit technological and scientific innovation in the UK. It falls under the Research and Development Expenditure Credit (RDEC) scheme and was introduced in the Finance Act 2013.

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R&D is a corporation tax relief that can help your firm by either reducing your corporation tax amount or by receiving a cash payment.

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What is R&D Tax Credit Relief?

 

R&D becomes applicable when a project is seeking to advance overall knowledge or capability. It allows companies to carry out qualifying R&D-related activities and claim corporation tax deductions. The level of the deduction depends on the scheme you use, which we will cover below.

 

In order to qualify for the R&D tax credit relief, your company must fall under the definition of an SME. An SME is where a company has:

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- staff headcount of less than 500

- either turnover EUR 100m or the balance sheet must be less than EUR 86m.

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Which projects qualify for R&D Tax Relief

 

a. what is the scientific or technological advance you made?

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Your project must show that it is developed for scientific or technological advancement. Rather than stating your product, process or functionality, the focus here should be the advancement your firm your made or is making.

 

b. what scientific or technological uncertainty did you face?

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You should show the scientific or technological uncertainty which existed and you aimed to tackle. Scientific or technological uncertainty exists when knowledge of whether something is scientifically possible or technologically feasible but achieving it isn't readily available e.g. by an expert professional working in a field.

 

c. how and when were the uncertainties overcome?

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Here you must describe the methods you used to overcome the uncertainties, including the investigations and analysis undertaken. You may also wish to describe the successes and failures you faced and the impact these had on your overall project. If the uncertainties weren't overcome then you should explain what happened. Remember, that the commercial failure of the project does not mean that the R&D was not present. Even if the scientific uncertainties were not overcome, your project can still qualify for the R&D tax credits.

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d. why wasn't the knowledge being sought readily available by competent professionals?

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If the innovation you were seeking was already available e.g. by a competent professional then you will be questioned as to why you didn't simply rely on such a professional instead of pursuing a new project. You should therefore demonstrate that the knowledge sought was not readily available and that the technological uncertainty therefore still existed.

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You may also need to show that the people leading the research are competent professionals working in the relevant field. This can be done by outlining their relevant backgrounds, experience and qualifications.

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When does an R&D project start and end for tax purposes?

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It is important that you know when an R&D project starts and ends so that your company is claiming the correct amount of relief.

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What cost qualify for an R&D tax credit relief project?

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There are 9 types of costs you can claim for:

 

1. Direct R&D staff costs - e.g. salaries and wages of those involved hands-on in the R&D project.

2. Externally provided R&D staff - e.g.external agency staff

3. Subcontracted R&D - you can claim 65% of the payment for unconnected/subcontracted parties.

4. R&D consumable items - e.g. materials such as water, fuel, and power consumption.

5. Software directly used in the R&D

6. Clinical trial volunteers - this is likely to be more relevant for pharma companies.

7. Contribution to independent research

8. Prototypes - the design, construction and testing costs are qualifying expenses.

9. Collaborative working e.g. two companies collaborating on an R&D project.

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What costs do not qualify for an R&D tax relief claim?

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The following do not qualify for R&D relief:

 

- The production and distribution of goods and services

- The cost of land

- Payments used towards patents and trademarks

- Capital expenditure

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How can Buckingham Capital help?

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We are helping firms claim qualifying R&D tax credits. We can help manage the entire end-to-end process of making your R&D tax credit claim. We will advise on which of your projects and costs qualify for a claim whilst preparing your claim and managing communication with HMRC.

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1. We manage the claim on an end-to-end basis for you

​This means that we will fully prepare your claim for you and manage communication with HMRC on your behalf.

 

2. We have over 10 years of experience and expertise

​This means that your claim will be handled by experts who specialise in R&D tax claims.

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​3. Director-led service

​Your point of contact will be with an R&D expert at the director level.

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4. You will only pay us if your claim is successful

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5. Fast and efficient claims process

The average R&D claim settlement time is 4 weeks

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How are R&D tax credits paid?

 

You will be paid either through a corporation tax rebate, cash credit or expenditure towards your profits. 

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Which documents will you require from me?

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We will only require a copy of your CT600 and company accounts. 

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How long does an R&D tax claim take to settle?

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The average R&D claim settlement time is 4 weeks

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Can HMRC conduct an investigation or ask further questions about my claim?

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Yes, HMRC may request further information and we will handle this fully on your behalf. 

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