R&D Cash and Tax Incentives
R&D tax relief is a UK government incentive that has been around since 2000. It aims to promote innovation, create jobs in the UK and attract foreign direct investment. Most people typically associate the words “research and development” with scientists in white lab coats or high-end engineers developing the latest ground-breaking technologies. However, the scheme has a much broader scope, covering industries as diverse as dentistry, waste management, and architecture. Your company may be eligible to claim R&D without even knowing it.
The latest government statistics show that in 2016-17 the total number of R&D tax relief claims rose to 52,335, an increase of 21.6% from 2015-16. The increase was primarily driven by a rise in the number of SME claims, which totalled 45,045 in 2016-17, an increase of 22.3% from 2015-16. As of October 2019, there have been 48,635 R&D tax credit claims for 2017-18, of which 42,075 are SME claims. These figures are based on partial data and are expected to increase as more returns are received.
The total amount of R&D support claimed increased to £4.4bn in 2016-17, an increase of 14% from the previous year. As of October 2019, £4.3bn of R&D tax relief support has been claimed for 2017-18 – again, this is expected to increase in the near future, as the latest figures are based on partial data.
How can my company benefit?
There are two schemes with differing levels of benefit – the SME scheme and the Large Company scheme. Your company’s headcount, turnover and total assets will determine which scheme it falls under.
If your company is an SME, whether it pays tax or not, it can benefit by receiving a cash injection of up to £33 for every £100 of qualifying expenditure. The level of benefit depends on the corporation tax position of your company. Profit-making companies typically receive £25 for every £100 of qualifying expenditure in the form of a corporation tax refund. Loss-making companies can receive between £19 (small loss) and £33 for every £100 of qualifying expenditure (large loss) – this is achieved by surrendering a portion of the company’s tax losses for a payable cash credit. Making an SME claim is a tax adjustment and does not have any negative effect on your company’s accounting profit.
The benefit for Large companies is the Research and Development Expenditure Credit (RDEC). The benefit level is slightly lower at £9 – £10 for every £100 of qualifying expenditure and is in the form of an “above the line” tax credit – this means that, unlike the SME benefit, it has a positive impact on a company’s accounting profit.
The benefit caps from the three schemes of R&D, Patent Box, and Land Remediation for both SMEs and Large Companies are compared below:
What are the qualifying criteria?
- Your entity needs to be filing a corporation tax return in the UK but does not need to be paying corporation tax – loss making companies can still benefit;
- You need to be engaged in a field of science or technology – this covers a broad range of activities;
- You need to be seeking an advance in your field – we will provide substantial guidance to you, based on our extensive knowledge and industry experience;
- In the process of seeking this advance your company should be seeking to overcome technological uncertainty – a good indicator of this is that several iterations are required in your attempts to solve a problem. The problem does not need to be resolved in the relevant accounting period you are claiming for and a failed project is actually a good indicator of R&D taking place.
What type of costs qualify?
Can I claim retrospectively?
Yes, a company can file a claim up to two years after the end of a relevant accounting period.
How can GKA Innovation help?
GKA’s unique team of industry-experienced PhD’s and chartered accountants can extract the nuggets of R&D from your regular business activities in a streamlined hassle-free manner. As experts in the field, we can maximise your claim relative to other providers/accountants and have never had a claim rejected.
We do the hard work, minimise form filling (e.g. payroll processing and questionnaire templates) and gather technical information through our educational industry-focused on-site workshops so you can focus on running your business.
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