How Research and Development tax reliefs can save you money

Hillier Hopkins LLP

Chartered Accountants & Tax Advisers

Call +44(0)330 024 3200 and discover how we can help you.

Almost 20 years after its introduction, 90% of eligible businesses still don’t claim Research and Development tax relief. Many don’t know they are eligible.

So if your company invests in any scientific or technological advancement, it is likely that you qualify for Research and Development (R&D) relief and can decrease your ​corporation tax payments.

What are R&D tax credits? And who can get the relief?

In 2000, the government introduced its Research and Development (R&D) Scheme, a Corporation Tax relief which encourages scientific and technological innovation within the United Kingdom. This was soon followed by the Research and Development Expenditure Credit (RDEC) scheme in the Finance Act 2013, which sees a cash payment or other duties for companies with no Corporation Tax liability. 

To qualify for these reliefs, a company must carry out research and development work in the science or technology industry. For example, you may be able to claim if you work on new construction techniques, software development, or engineering design. 

How much is the research and development tax relief?

The level of credit received depends on factors such as the size of a business, but can be up to 33p for every £1 of qualifying expenditure. 

Typical qualifying expenditures include: 
• Staff salaries
• Staff pension contributions 
• Employing subcontractors or freelancers
• Materials and consumables 
• Certain software or tools 

Please note: You can claim both a grant and R&S tax credit, however this may impact the level of relief you receive. 

The R&D scheme does not cover the preparing and registering of patents. However, the Patent Box provides benefits to companies who own or exclusively license-in patents, and have undertaken qualifying activity.

Benefiting from the Patent Box is possible if these patents are granted by the UK Intellectual Property Office, European Patent Office, or many countries in the European Economic Area. 

How to apply for R&D tax reliefs 

You may be eligible for R&D tax credits if you are an SME with less than 500 members of staff and turnover less than the sterling equivalent of €100m or have a balance sheet total of under €86m.

In order to benefit from reduced Corporation Tax rates, you must make an election in the computations accompanying your Company Tax Return or separately in writing. This must be made within two years of the end of the accounting period in which the profits and income in question arose. 

Alternatively, make the process as simple and fuss-free as possible by enlisting the reliable accounting and tax services of an expert. Our friendly and knowledgeable team here at Hiller Hopkins can advise on whether you’re eligible for this relief, as well as help you apply. 

Get in touch to learn more about our accounting and tax services. Call 0330 024 3200 today. 
 
Find out more
Reducing your tax bill with R&D Tax Credits – Thursday 6 June 2019, Cranfield University