News

Leanne Tickle, R&D Consultant, talks about Research and Development (R&D) tax relief, a HMRC backed initiative supporting innovation in business.

What exactly is R&D tax relief?
R&D tax relief is a HMRC backed initiative that supports innovation in business.  It has gained increased publicity over recent years due to its ability to generate company cash in a period of time where cash is tighter than ever.  Don’t be fooled though, this isn’t a cash handout to companies, instead it is a reward for innovation in the UK and an investment in UK businesses.

So how do I qualify?
Firstly, you need to be trading through a UK company structure, this is not a relief that is available for sole trade businesses or partnerships.  You also need to be either investing your own money to develop a new product or making efficiencies to your business.

It may be that you have developed something yourself or have instructed an employee to look at efficiencies within your business.  You may also qualify if you have instructed third party experts to outsource the work, although there are certain restrictions to this.  Our team of experts can help ensure you tick all the right boxes to make a successful claim.

Isn’t this just for people in science labs?
No, definitely not.  R&D tax relief can take place in any sector, from agriculture to manufacturing and engineering, not just white coats in science labs, although these do qualify too.  For instance:

• Are you a farmer who is constantly looking at ways to improve your milk quality?
• Are you a builder and are looking at the environmental impact of your waste?
• Have you developed new software that is unlike the other options on the market?

How does it work?
R&D tax relief can be claimed for up to two years before your current accounting period.  The criteria for an R&D tax relief claim is not based on whether the project is successful or not; it’s based on the activities that are carried out.  There are two schemes available and both have criteria to meet to be able to qualify.  A claim needs to be compiled into a robust report using day to day business costs and an explanation.  This would then be included on your Corporation Tax return and submitted to HMRC.

Prior to 1 April 2023, if you qualify for the small company scheme, for every £1 you spend on research and development activity, HMRC will uplift this amount by £1.30.  In real money terms, if you were to invest £10,000 in research and development, you would be able to claim an additional £13,000 as an expense on your Corporation Tax return.  This would then turn into a tax saving or repayment depending on your circumstances.

I’ve seen changes mentioned in the news, how will they affect me?
It has been announced in the Autumn Statement that from 1 April 2023 there will be changes to the reliefs available through an R&D tax relief claim.  After 1 April 2023, for every £1 spent through the small company scheme, HMRC will now uplift this by 86p, which means that in real money, a £10,000 spend will be uplifted to £18,600.

This all sounds great, how do I start the process?
Please contact us to arrange a free initial meeting with a member of our R&D team, which will take up no more than an hour of your time.  We will get to know all aspects of your business, to allow us to identify work you are undertaking which may be eligible for R&D tax relief.  If a project does qualify, we will help you to gather the necessary evidence, compile your investment costs and submit a claim to HMRC on your behalf.